Correlation Between Splunk and StoneCo

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

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

Diversification Opportunities for Splunk and StoneCo

-0.69

Correlation Coefficient

Splunk  StoneCo

Excellent diversification

The 3 months correlation between Splunk and StoneCo is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Splunk Inc and StoneCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StoneCo and Splunk 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 Splunk Inc 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 Splunk i.e., Splunk and StoneCo go up and down completely randomly.

Pair Corralation between Splunk and StoneCo

If you would invest  10,358  in Splunk Inc on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Splunk Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Splunk Inc  vs.  StoneCo

Splunk Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Splunk Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Splunk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 weak 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 Splunk and StoneCo

The main advantage of trading using opposite Splunk and StoneCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Splunk 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 Splunk Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.