Correlation Between Snowflake and LYFT
Can any of the company-specific risk be diversified away by investing in both Snowflake and LYFT 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 Snowflake and LYFT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snowflake and LYFT Inc, you can compare the effects of market volatilities on Snowflake and LYFT 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 Snowflake with a short position of LYFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and LYFT.
Diversification Opportunities for Snowflake and LYFT
Poor diversification
The 3 months correlation between Snowflake and LYFT is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and LYFT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYFT Inc and Snowflake 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 Snowflake are associated (or correlated) with LYFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYFT Inc has no effect on the direction of Snowflake i.e., Snowflake and LYFT go up and down completely randomly.
Pair Corralation between Snowflake and LYFT
Given the investment horizon of 90 days Snowflake is expected to generate 1.26 times more return on investment than LYFT. However, Snowflake is 1.26 times more volatile than LYFT Inc. It trades about 0.29 of its potential returns per unit of risk. LYFT Inc is currently generating about 0.16 per unit of risk. If you would invest 11,361 in Snowflake on August 24, 2024 and sell it today you would earn a total of 5,774 from holding Snowflake or generate 50.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snowflake vs. LYFT Inc
Performance |
| Timeline |
| Snowflake |
| LYFT Inc |
Snowflake and LYFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snowflake and LYFT
The main advantage of trading using opposite Snowflake and LYFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snowflake position performs unexpectedly, LYFT 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 LYFT will offset losses from the drop in LYFT's long position.The idea behind Snowflake and LYFT 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.| LYFT vs. Manhattan Associates | LYFT vs. Paycom Soft | LYFT vs. Clearwater Analytics Holdings | LYFT vs. Procore Technologies |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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