Correlation Between StoneCo and Confluent

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

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

Diversification Opportunities for StoneCo and Confluent

-0.76

Correlation Coefficient

StoneCo  Confluent

Pay attention - limited upside

The 3 months correlation between StoneCo and Confluent is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and Confluent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Confluent 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 Confluent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Confluent has no effect on the direction of StoneCo i.e., StoneCo and Confluent go up and down completely randomly.

Pair Corralation between StoneCo and Confluent

Given the investment horizon of 90 days StoneCo is expected to generate 15.37 times less return on investment than Confluent. But when comparing it to its historical volatility, StoneCo is 1.48 times less risky than Confluent. It trades about 0.0 of its potential returns per unit of risk. Confluent is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,200  in Confluent on September 19, 2024 and sell it today you would earn a total of  746.00  from holding Confluent or generate 33.91% return on investment over 90 days.

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

StoneCo  vs.  Confluent

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 uncertain 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.

Confluent

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with StoneCo and Confluent

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

The idea behind StoneCo and Confluent 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.