Correlation Between PagSeguro Digital and Cloudflare

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

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

Diversification Opportunities for PagSeguro Digital and Cloudflare

-0.62

Correlation Coefficient

PagSeguro Digital  Cloudflare

Excellent diversification

The 3 months correlation between PagSeguro and Cloudflare is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PagSeguro Digital and Cloudflare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloudflare and PagSeguro Digital 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 PagSeguro Digital 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 PagSeguro Digital i.e., PagSeguro Digital and Cloudflare go up and down completely randomly.

Pair Corralation between PagSeguro Digital and Cloudflare

Given the investment horizon of 90 days PagSeguro Digital is expected to under-perform the Cloudflare. But the stock apears to be less risky and, when comparing its historical volatility, PagSeguro Digital is 1.18 times less risky than Cloudflare. The stock trades about -0.23 of its potential returns per unit of risk. The Cloudflare is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,214  in Cloudflare on August 30, 2024 and sell it today you would earn a total of  1,723  from holding Cloudflare or generate 20.98% return on investment over 90 days.

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

PagSeguro Digital  vs.  Cloudflare

PagSeguro Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PagSeguro Digital 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 comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cloudflare

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudflare are ranked lower than 9 (%) 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.

Pair Trading with PagSeguro Digital and Cloudflare

The main advantage of trading using opposite PagSeguro Digital and Cloudflare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PagSeguro Digital 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 PagSeguro Digital 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.