Correlation Between Endava and StoneCo
Can any of the company-specific risk be diversified away by investing in both Endava and StoneCo 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 Endava and StoneCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Endava and StoneCo, you can compare the effects of market volatilities on Endava and StoneCo 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 Endava with a short position of StoneCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endava and StoneCo.
Diversification Opportunities for Endava and StoneCo
Pay attention - limited upside
The 3 months correlation between Endava and StoneCo is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Endava and StoneCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StoneCo and Endava 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 Endava are associated (or correlated) with StoneCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StoneCo has no effect on the direction of Endava i.e., Endava and StoneCo go up and down completely randomly.
Pair Corralation between Endava and StoneCo
Given the investment horizon of 90 days Endava is expected to generate 4.21 times less return on investment than StoneCo. But when comparing it to its historical volatility, Endava is 2.08 times less risky than StoneCo. It trades about 0.06 of its potential returns per unit of risk. StoneCo is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 809.00 in StoneCo on October 23, 2024 and sell it today you would earn a total of 47.00 from holding StoneCo or generate 5.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Endava vs. StoneCo
Performance |
| Timeline |
| Endava |
| StoneCo |
Endava and StoneCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Endava and StoneCo
The main advantage of trading using opposite Endava and StoneCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endava position performs unexpectedly, StoneCo 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 StoneCo will offset losses from the drop in StoneCo's long position.The idea behind Endava and StoneCo 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.Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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