Correlation Between StoneCo and Network 1

Can any of the company-specific risk be diversified away by investing in both StoneCo and Network 1 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 Network 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between StoneCo and Network 1 Technologies, you can compare the effects of market volatilities on StoneCo and Network 1 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 Network 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of StoneCo and Network 1.

Diversification Opportunities for StoneCo and Network 1

0.26

Correlation Coefficient

StoneCo  Network 1

Modest diversification

The 3 months correlation between StoneCo and Network is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and Network 1 Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network 1 Technologies 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 Network 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network 1 Technologies has no effect on the direction of StoneCo i.e., StoneCo and Network 1 go up and down completely randomly.

Pair Corralation between StoneCo and Network 1

Given the investment horizon of 90 days StoneCo is expected to under-perform the Network 1. In addition to that, StoneCo is 1.39 times more volatile than Network 1 Technologies. It trades about -0.49 of its total potential returns per unit of risk. Network 1 Technologies is currently generating about -0.1 per unit of volatility. If you would invest  134.00  in Network 1 Technologies on September 24, 2024 and sell it today you would lose (6.00) from holding Network 1 Technologies or give up 4.48% of portfolio value over 90 days.

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

StoneCo  vs.  Network 1 Technologies

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.

Network 1 Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network 1 Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with StoneCo and Network 1

The main advantage of trading using opposite StoneCo and Network 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if StoneCo position performs unexpectedly, Network 1 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 Network 1 will offset losses from the drop in Network 1's long position.

The idea behind StoneCo and Network 1 Technologies 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.