Correlation Between StoneCo and Bakkt Holdings

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

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

Diversification Opportunities for StoneCo and Bakkt Holdings

-0.48

Correlation Coefficient

StoneCo  Bakkt Holdings

Very good diversification

The 3 months correlation between StoneCo and Bakkt is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and Bakkt Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakkt Holdings and StoneCo 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 StoneCo are associated (or correlated) with Bakkt Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakkt Holdings has no effect on the direction of StoneCo i.e., StoneCo and Bakkt Holdings go up and down completely randomly.

Pair Corralation between StoneCo and Bakkt Holdings

Given the investment horizon of 90 days StoneCo is expected to under-perform the Bakkt Holdings. But the stock apears to be less risky and, when comparing its historical volatility, StoneCo is 4.24 times less risky than Bakkt Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Bakkt Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,575  in Bakkt Holdings on August 31, 2024 and sell it today you would lose (790.00) from holding Bakkt Holdings or give up 22.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

StoneCo  vs.  Bakkt Holdings

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 unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bakkt Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bakkt Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward-looking signals, Bakkt Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with StoneCo and Bakkt Holdings

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

The idea behind StoneCo and Bakkt 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.