Correlation Between StoneCo and VMware

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

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

Diversification Opportunities for StoneCo and VMware

-0.9

Correlation Coefficient

StoneCo  VMware

Pay attention - limited upside

The 3 months correlation between StoneCo and VMware is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and VMware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMware Inc 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 VMware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VMware Inc has no effect on the direction of StoneCo i.e., StoneCo and VMware go up and down completely randomly.

Pair Corralation between StoneCo and VMware

Given the investment horizon of 90 days StoneCo is expected to under-perform the VMware. In addition to that, StoneCo is 1.81 times more volatile than VMware Inc. It trades about 0.0 of its total potential returns per unit of risk. VMware Inc is currently generating about 0.17 per unit of volatility. If you would invest  11,934  in VMware Inc on September 27, 2024 and sell it today you would earn a total of  4,109  from holding VMware Inc or generate 34.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	24.53%
Values	Daily Returns

StoneCo  vs.  VMware Inc

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.

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with StoneCo and VMware

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

The idea behind StoneCo and VMware Inc 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 CEOs Directory module to screen CEOs from public companies around the world.