Correlation Between StoneCo and Endava
Can any of the company-specific risk be diversified away by investing in both StoneCo and Endava 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 StoneCo and Endava into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between StoneCo and Endava, you can compare the effects of market volatilities on StoneCo and Endava 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 StoneCo with a short position of Endava. Check out your portfolio center. Please also check ongoing floating volatility patterns of StoneCo and Endava.
Diversification Opportunities for StoneCo and Endava
Pay attention - limited upside
The 3 months correlation between StoneCo and Endava is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and Endava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endava and StoneCo 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 StoneCo are associated (or correlated) with Endava. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endava has no effect on the direction of StoneCo i.e., StoneCo and Endava go up and down completely randomly.
Pair Corralation between StoneCo and Endava
Given the investment horizon of 90 days StoneCo is expected to generate 2.08 times more return on investment than Endava. However, StoneCo is 2.08 times more volatile than Endava. It trades about 0.13 of its potential returns per unit of risk. Endava is currently generating about 0.06 per unit of risk. 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 |
StoneCo vs. Endava
Performance |
| Timeline |
| StoneCo |
| Endava |
StoneCo and Endava Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with StoneCo and Endava
The main advantage of trading using opposite StoneCo and Endava positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if StoneCo position performs unexpectedly, Endava 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 Endava will offset losses from the drop in Endava's long position.The idea behind StoneCo and Endava 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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