Correlation Between Square and CrowdStrike Holdings

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

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

Diversification Opportunities for Square and CrowdStrike Holdings

0.96

Correlation Coefficient

Square  CrowdStrike Holdings

Almost no diversification

The 3 months correlation between Square and CrowdStrike is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Square Inc and CrowdStrike Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CrowdStrike Holdings and Square 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 Square Inc are associated (or correlated) with CrowdStrike Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CrowdStrike Holdings has no effect on the direction of Square i.e., Square and CrowdStrike Holdings go up and down completely randomly.

Pair Corralation between Square and CrowdStrike Holdings

Assuming the 90 days horizon Square Inc is expected to generate 1.07 times more return on investment than CrowdStrike Holdings. However, Square is 1.07 times more volatile than CrowdStrike Holdings. It trades about 0.18 of its potential returns per unit of risk. CrowdStrike Holdings is currently generating about 0.15 per unit of risk. If you would invest  6,081  in Square Inc on September 22, 2024 and sell it today you would earn a total of  2,372  from holding Square Inc or generate 39.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

Square Inc  vs.  CrowdStrike Holdings

Square Inc

Risk-Adjusted Performance

14 of 100

Good

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

CrowdStrike Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CrowdStrike Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CrowdStrike Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Square and CrowdStrike Holdings

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

The idea behind Square Inc and CrowdStrike Holdings 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.