Correlation Between Snowflake and HubSpot

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

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

Diversification Opportunities for Snowflake and HubSpot

0.88

Correlation Coefficient

Snowflake  HubSpot

Very poor diversification

The 3 months correlation between Snowflake and HubSpot is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and HubSpot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HubSpot and Snowflake 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 Snowflake are associated (or correlated) with HubSpot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HubSpot has no effect on the direction of Snowflake i.e., Snowflake and HubSpot go up and down completely randomly.

Pair Corralation between Snowflake and HubSpot

Given the investment horizon of 90 days Snowflake is expected to generate 1.19 times more return on investment than HubSpot. However, Snowflake is 1.19 times more volatile than HubSpot. It trades about 0.03 of its potential returns per unit of risk. HubSpot is currently generating about 0.01 per unit of risk. If you would invest  17,242  in Snowflake on December 1, 2024 and sell it today you would earn a total of  468.00  from holding Snowflake or generate 2.71% return on investment over 90 days.

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

Snowflake  vs.  HubSpot

Snowflake

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Snowflake are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Snowflake is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

HubSpot

Risk-Adjusted Performance

Very Weak

Over the last 90 days HubSpot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, HubSpot is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Snowflake and HubSpot

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

The idea behind Snowflake and HubSpot 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.