Correlation Between Riskified and Sprout Social

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

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

Diversification Opportunities for Riskified and Sprout Social

0.72

Correlation Coefficient

Riskified  Sprout Social

Poor diversification

The 3 months correlation between Riskified and Sprout is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Riskified and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social and Riskified 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 Riskified are associated (or correlated) with Sprout Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprout Social has no effect on the direction of Riskified i.e., Riskified and Sprout Social go up and down completely randomly.

Pair Corralation between Riskified and Sprout Social

Given the investment horizon of 90 days Riskified is expected to generate 13.42 times less return on investment than Sprout Social. But when comparing it to its historical volatility, Riskified is 1.51 times less risky than Sprout Social. It trades about 0.01 of its potential returns per unit of risk. Sprout Social is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,902  in Sprout Social on September 19, 2024 and sell it today you would earn a total of  568.00  from holding Sprout Social or generate 19.57% return on investment over 90 days.

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

Riskified  vs.  Sprout Social

Riskified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riskified has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Riskified is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Sprout Social

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprout Social are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Sprout Social unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Riskified and Sprout Social

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

The idea behind Riskified and Sprout Social 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.