Correlation Between Cloudflare and Paysafe

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

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

Diversification Opportunities for Cloudflare and Paysafe

-0.62

Correlation Coefficient

Cloudflare  Paysafe

Excellent diversification

The 3 months correlation between Cloudflare and Paysafe is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cloudflare and Paysafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paysafe and Cloudflare 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 are associated (or correlated) with Paysafe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paysafe has no effect on the direction of Cloudflare i.e., Cloudflare and Paysafe go up and down completely randomly.

Pair Corralation between Cloudflare and Paysafe

Considering the 90-day investment horizon Cloudflare is expected to generate 0.72 times more return on investment than Paysafe. However, Cloudflare is 1.39 times less risky than Paysafe. It trades about 0.18 of its potential returns per unit of risk. Paysafe is currently generating about -0.07 per unit of risk. If you would invest  8,236  in Cloudflare on September 26, 2024 and sell it today you would earn a total of  2,922  from holding Cloudflare or generate 35.48% return on investment over 90 days.

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

Cloudflare  vs.  Paysafe

Cloudflare

Risk-Adjusted Performance

14 of 100

Good

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

Paysafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paysafe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cloudflare and Paysafe

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

The idea behind Cloudflare and Paysafe 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.