Correlation Between StoneCo and GigaCloud Technology

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

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

Diversification Opportunities for StoneCo and GigaCloud Technology

0.02

Correlation Coefficient

StoneCo  GigaCloud Technology

Significant diversification

The 3 months correlation between StoneCo and GigaCloud is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and GigaCloud Technology Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaCloud Technology 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 GigaCloud Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaCloud Technology has no effect on the direction of StoneCo i.e., StoneCo and GigaCloud Technology go up and down completely randomly.

Pair Corralation between StoneCo and GigaCloud Technology

Given the investment horizon of 90 days StoneCo is expected to generate 41.68 times less return on investment than GigaCloud Technology. But when comparing it to its historical volatility, StoneCo is 2.02 times less risky than GigaCloud Technology. It trades about 0.0 of its potential returns per unit of risk. GigaCloud Technology Class is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  560.00  in GigaCloud Technology Class on September 19, 2024 and sell it today you would earn a total of  1,409  from holding GigaCloud Technology Class or generate 251.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

StoneCo  vs.  GigaCloud Technology Class

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.

GigaCloud Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with StoneCo and GigaCloud Technology

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

The idea behind StoneCo and GigaCloud Technology Class 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.