Correlation Between Pagaya Technologies and Cloudflare

Can any of the company-specific risk be diversified away by investing in both Pagaya Technologies and Cloudflare 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 Pagaya Technologies and Cloudflare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pagaya Technologies and Cloudflare, you can compare the effects of market volatilities on Pagaya Technologies and Cloudflare 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 Pagaya Technologies with a short position of Cloudflare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pagaya Technologies and Cloudflare.

Diversification Opportunities for Pagaya Technologies and Cloudflare

0.68

Correlation Coefficient

Pagaya Technologies  Cloudflare

Poor diversification

The 3 months correlation between Pagaya and Cloudflare is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Pagaya Technologies and Cloudflare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloudflare and Pagaya Technologies 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 Pagaya Technologies are associated (or correlated) with Cloudflare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloudflare has no effect on the direction of Pagaya Technologies i.e., Pagaya Technologies and Cloudflare go up and down completely randomly.

Pair Corralation between Pagaya Technologies and Cloudflare

Considering the 90-day investment horizon Pagaya Technologies is expected to generate 1.41 times less return on investment than Cloudflare. In addition to that, Pagaya Technologies is 1.64 times more volatile than Cloudflare. It trades about 0.07 of its total potential returns per unit of risk. Cloudflare is currently generating about 0.17 per unit of volatility. If you would invest  10,505  in Cloudflare on December 1, 2024 and sell it today you would earn a total of  4,025  from holding Cloudflare or generate 38.32% return on investment over 90 days.

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

Pagaya Technologies  vs.  Cloudflare

Pagaya Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pagaya Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pagaya Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Cloudflare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudflare are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Cloudflare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pagaya Technologies and Cloudflare

The main advantage of trading using opposite Pagaya Technologies and Cloudflare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pagaya Technologies position performs unexpectedly, Cloudflare 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 Cloudflare will offset losses from the drop in Cloudflare's long position.

The idea behind Pagaya Technologies and Cloudflare 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.