Correlation Between Trade Desk and Snowflake

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

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

Diversification Opportunities for Trade Desk and Snowflake

-0.21

Correlation Coefficient

Trade Desk  Snowflake

Very good diversification

The 3 months correlation between Trade and Snowflake is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Trade Desk and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake and Trade Desk 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 Trade Desk are associated (or correlated) with Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of Trade Desk i.e., Trade Desk and Snowflake go up and down completely randomly.

Pair Corralation between Trade Desk and Snowflake

Considering the 90-day investment horizon Trade Desk is expected to under-perform the Snowflake. In addition to that, Trade Desk is 2.62 times more volatile than Snowflake. It trades about -0.24 of its total potential returns per unit of risk. Snowflake is currently generating about -0.1 per unit of volatility. If you would invest  17,552  in Snowflake on November 28, 2024 and sell it today you would lose (1,132) from holding Snowflake or give up 6.45% of portfolio value over 90 days.

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

Trade Desk  vs.  Snowflake

Trade Desk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trade Desk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Snowflake

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Trade Desk and Snowflake

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

The idea behind Trade Desk and Snowflake 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.