Correlation Between Pagerduty and Sprout Social

Can any of the company-specific risk be diversified away by investing in both Pagerduty and Sprout Social at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Pagerduty and Sprout Social into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pagerduty and Sprout Social, you can compare the effects of market volatilities on Pagerduty and Sprout Social and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Pagerduty with a short position of Sprout Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pagerduty and Sprout Social.

Diversification Opportunities for Pagerduty and Sprout Social

0.37

Correlation Coefficient

Pagerduty  Sprout Social

Weak diversification

The 3 months correlation between Pagerduty and Sprout is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pagerduty and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social and Pagerduty is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Pagerduty are associated (or correlated) with Sprout Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprout Social has no effect on the direction of Pagerduty i.e., Pagerduty and Sprout Social go up and down completely randomly.

Pair Corralation between Pagerduty and Sprout Social

Allowing for the 90-day total investment horizon Pagerduty is expected to under-perform the Sprout Social. But the stock apears to be less risky and, when comparing its historical volatility, Pagerduty is 1.49 times less risky than Sprout Social. The stock trades about -0.16 of its potential returns per unit of risk. The Sprout Social is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,202  in Sprout Social on November 28, 2024 and sell it today you would lose (434.00) from holding Sprout Social or give up 13.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Pagerduty  vs.  Sprout Social

Pagerduty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pagerduty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sprout Social

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprout Social has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Pagerduty and Sprout Social

The main advantage of trading using opposite Pagerduty and Sprout Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pagerduty position performs unexpectedly, Sprout Social can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sprout Social will offset losses from the drop in Sprout Social's long position.

The idea behind Pagerduty and Sprout Social pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.