Correlation Between Toast and Cloudflare
Can any of the company-specific risk be diversified away by investing in both Toast and Cloudflare 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 Toast and Cloudflare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toast Inc and Cloudflare, you can compare the effects of market volatilities on Toast and Cloudflare 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 Toast with a short position of Cloudflare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toast and Cloudflare.
Diversification Opportunities for Toast and Cloudflare
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Toast and Cloudflare is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Toast Inc and Cloudflare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloudflare and Toast 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 Toast Inc are associated (or correlated) with Cloudflare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloudflare has no effect on the direction of Toast i.e., Toast and Cloudflare go up and down completely randomly.
Pair Corralation between Toast and Cloudflare
Given the investment horizon of 90 days Toast Inc is expected to generate 1.18 times more return on investment than Cloudflare. However, Toast is 1.18 times more volatile than Cloudflare. It trades about 0.49 of its potential returns per unit of risk. Cloudflare is currently generating about 0.27 per unit of risk. 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 |
Toast Inc vs. Cloudflare
Performance |
| Timeline |
| Toast Inc |
| Cloudflare |
Toast and Cloudflare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toast and Cloudflare
The main advantage of trading using opposite Toast and Cloudflare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toast position performs unexpectedly, Cloudflare 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 Cloudflare will offset losses from the drop in Cloudflare's long position.The idea behind Toast Inc and Cloudflare 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.| 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 Stocks Directory module to find actively traded stocks across global markets.
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