Correlation Between Sitime and Sprout Social

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

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

Diversification Opportunities for Sitime and Sprout Social

0.84

Correlation Coefficient

Sitime  Sprout Social

Very poor diversification

The 3 months correlation between Sitime and Sprout is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sitime and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social and Sitime 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 Sitime 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 Sitime i.e., Sitime and Sprout Social go up and down completely randomly.

Pair Corralation between Sitime and Sprout Social

Given the investment horizon of 90 days Sitime is expected to generate 1.29 times more return on investment than Sprout Social. However, Sitime is 1.29 times more volatile than Sprout Social. It trades about 0.11 of its potential returns per unit of risk. Sprout Social is currently generating about 0.06 per unit of risk. If you would invest  17,968  in Sitime on October 5, 2024 and sell it today you would earn a total of  4,393  from holding Sitime or generate 24.45% return on investment over 90 days.

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

Sitime  vs.  Sprout Social

Sitime

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitime are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Sitime displayed solid returns over the last few months and may actually be approaching a breakup point.

Sprout Social

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sprout Social are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sprout Social may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sitime and Sprout Social

The main advantage of trading using opposite Sitime and Sprout Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sitime 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 Sitime 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.