Correlation Between SentinelOne and StoneCo

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

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

Diversification Opportunities for SentinelOne and StoneCo

-0.58

Correlation Coefficient

SentinelOne  StoneCo

Excellent diversification

The 3 months correlation between SentinelOne and StoneCo is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and StoneCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StoneCo and SentinelOne 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 SentinelOne are associated (or correlated) with StoneCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StoneCo has no effect on the direction of SentinelOne i.e., SentinelOne and StoneCo go up and down completely randomly.

Pair Corralation between SentinelOne and StoneCo

Taking into account the 90-day investment horizon SentinelOne is expected to generate 0.78 times more return on investment than StoneCo. However, SentinelOne is 1.28 times less risky than StoneCo. It trades about 0.13 of its potential returns per unit of risk. StoneCo is currently generating about -0.09 per unit of risk. If you would invest  2,284  in SentinelOne on September 5, 2024 and sell it today you would earn a total of  471.00  from holding SentinelOne or generate 20.62% return on investment over 90 days.

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

SentinelOne  vs.  StoneCo

SentinelOne

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SentinelOne are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, SentinelOne unveiled solid returns over the last few months and may actually be approaching a breakup point.

StoneCo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SentinelOne and StoneCo

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

The idea behind SentinelOne and StoneCo 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.