Correlation Between Toast and Dlocal

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

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

Diversification Opportunities for Toast and Dlocal

0.84

Correlation Coefficient

Toast  Dlocal

Very poor diversification

The 3 months correlation between Toast and Dlocal is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Toast Inc and Dlocal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dlocal and Toast 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 Toast Inc are associated (or correlated) with Dlocal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dlocal has no effect on the direction of Toast i.e., Toast and Dlocal go up and down completely randomly.

Pair Corralation between Toast and Dlocal

Given the investment horizon of 90 days Toast Inc is expected to generate 0.59 times more return on investment than Dlocal. However, Toast Inc is 1.68 times less risky than Dlocal. It trades about -0.01 of its potential returns per unit of risk. Dlocal is currently generating about -0.06 per unit of risk. If you would invest  3,750  in Toast Inc on December 27, 2024 and sell it today you would lose (153.00) from holding Toast Inc or give up 4.08% of portfolio value over 90 days.

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

Toast Inc  vs.  Dlocal

Toast Inc

Risk-Adjusted Performance

Very Weak

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

Dlocal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dlocal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Toast and Dlocal

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

The idea behind Toast Inc and Dlocal 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.