Correlation Between Cloudflare and Toast
Can any of the company-specific risk be diversified away by investing in both Cloudflare and Toast 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 Cloudflare and Toast into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cloudflare and Toast Inc, you can compare the effects of market volatilities on Cloudflare and Toast 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 Cloudflare with a short position of Toast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cloudflare and Toast.
Diversification Opportunities for Cloudflare and Toast
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cloudflare and Toast is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cloudflare and Toast Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toast Inc and Cloudflare 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 Cloudflare are associated (or correlated) with Toast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toast Inc has no effect on the direction of Cloudflare i.e., Cloudflare and Toast go up and down completely randomly.
Pair Corralation between Cloudflare and Toast
Considering the 90-day investment horizon Cloudflare is expected to generate 2.12 times less return on investment than Toast. But when comparing it to its historical volatility, Cloudflare is 1.18 times less risky than Toast. It trades about 0.27 of its potential returns per unit of risk. Toast Inc is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 3,012 in Toast Inc on August 28, 2024 and sell it today you would earn a total of 1,288 from holding Toast Inc or generate 42.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cloudflare vs. Toast Inc
Performance |
| Timeline |
| Cloudflare |
| Toast Inc |
Cloudflare and Toast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cloudflare and Toast
The main advantage of trading using opposite Cloudflare and Toast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cloudflare position performs unexpectedly, Toast 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 Toast will offset losses from the drop in Toast's long position.| Cloudflare vs. GigaCloud Technology Class | Cloudflare vs. Arqit Quantum | Cloudflare vs. Telos Corp | Cloudflare vs. Cemtrex |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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