Correlation Between Sprout Social and Freshworks
Can any of the company-specific risk be diversified away by investing in both Sprout Social and Freshworks 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 Sprout Social and Freshworks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprout Social and Freshworks, you can compare the effects of market volatilities on Sprout Social and Freshworks 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 Sprout Social with a short position of Freshworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprout Social and Freshworks.
Diversification Opportunities for Sprout Social and Freshworks
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sprout and Freshworks is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sprout Social and Freshworks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshworks and Sprout Social 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 Sprout Social are associated (or correlated) with Freshworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freshworks has no effect on the direction of Sprout Social i.e., Sprout Social and Freshworks go up and down completely randomly.
Pair Corralation between Sprout Social and Freshworks
Considering the 90-day investment horizon Sprout Social is expected to generate 1.8 times less return on investment than Freshworks. But when comparing it to its historical volatility, Sprout Social is 1.57 times less risky than Freshworks. It trades about 0.23 of its potential returns per unit of risk. Freshworks is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,169 in Freshworks on August 28, 2024 and sell it today you would earn a total of 476.00 from holding Freshworks or generate 40.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprout Social vs. Freshworks
Performance |
| Timeline |
| Sprout Social |
| Freshworks |
Sprout Social and Freshworks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprout Social and Freshworks
The main advantage of trading using opposite Sprout Social and Freshworks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprout Social position performs unexpectedly, Freshworks 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 Freshworks will offset losses from the drop in Freshworks' long position.The idea behind Sprout Social and Freshworks 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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