Correlation Between Shopify and Atlassian Plc

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

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

Diversification Opportunities for Shopify and Atlassian Plc

0.76

Correlation Coefficient

Shopify  Atlassian Plc

Poor diversification

The 3 months correlation between Shopify and Atlassian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Atlassian Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlassian Plc and Shopify 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 Shopify are associated (or correlated) with Atlassian Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlassian Plc has no effect on the direction of Shopify i.e., Shopify and Atlassian Plc go up and down completely randomly.

Pair Corralation between Shopify and Atlassian Plc

Assuming the 90 days trading horizon Shopify is expected to generate 1.38 times more return on investment than Atlassian Plc. However, Shopify is 1.38 times more volatile than Atlassian Plc. It trades about -0.17 of its potential returns per unit of risk. Atlassian Plc is currently generating about -0.31 per unit of risk. If you would invest  584.00  in Shopify on October 12, 2024 and sell it today you would lose (44.00) from holding Shopify or give up 7.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Shopify  vs.  Atlassian Plc

Shopify

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Shopify sustained solid returns over the last few months and may actually be approaching a breakup point.

Atlassian Plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atlassian Plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Atlassian Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shopify and Atlassian Plc

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

The idea behind Shopify and Atlassian Plc 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.