Correlation Between CLOUDFLARE INC and NEXTDC

Can any of the company-specific risk be diversified away by investing in both CLOUDFLARE INC and NEXTDC 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 INC and NEXTDC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CLOUDFLARE INC A and NEXTDC LTD, you can compare the effects of market volatilities on CLOUDFLARE INC and NEXTDC 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 INC with a short position of NEXTDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CLOUDFLARE INC and NEXTDC.

Diversification Opportunities for CLOUDFLARE INC and NEXTDC

-0.69

Correlation Coefficient

CLOUDFLARE INC  NEXTDC

Excellent diversification

The 3 months correlation between CLOUDFLARE and NEXTDC is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding CLOUDFLARE INC A and NEXTDC LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC LTD and CLOUDFLARE INC 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 INC A are associated (or correlated) with NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC LTD has no effect on the direction of CLOUDFLARE INC i.e., CLOUDFLARE INC and NEXTDC go up and down completely randomly.

Pair Corralation between CLOUDFLARE INC and NEXTDC

Assuming the 90 days trading horizon CLOUDFLARE INC A is expected to generate 0.8 times more return on investment than NEXTDC. However, CLOUDFLARE INC A is 1.24 times less risky than NEXTDC. It trades about 0.06 of its potential returns per unit of risk. NEXTDC LTD is currently generating about -0.21 per unit of risk. If you would invest  10,198  in CLOUDFLARE INC A on September 24, 2024 and sell it today you would earn a total of  232.00  from holding CLOUDFLARE INC A or generate 2.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CLOUDFLARE INC A  vs.  NEXTDC LTD

CLOUDFLARE INC A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CLOUDFLARE INC A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, CLOUDFLARE INC unveiled solid returns over the last few months and may actually be approaching a breakup point.

NEXTDC LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXTDC LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CLOUDFLARE INC and NEXTDC

The main advantage of trading using opposite CLOUDFLARE INC and NEXTDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CLOUDFLARE INC position performs unexpectedly, NEXTDC 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 NEXTDC will offset losses from the drop in NEXTDC's long position.

The idea behind CLOUDFLARE INC A and NEXTDC LTD 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.