Correlation Between Shopify and WonderFi Technologies

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

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

Diversification Opportunities for Shopify and WonderFi Technologies

0.76

Correlation Coefficient

Shopify  WonderFi Technologies

Poor diversification

The 3 months correlation between Shopify and WonderFi is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and WonderFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WonderFi Technologies and Shopify 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 Shopify are associated (or correlated) with WonderFi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WonderFi Technologies has no effect on the direction of Shopify i.e., Shopify and WonderFi Technologies go up and down completely randomly.

Pair Corralation between Shopify and WonderFi Technologies

Given the investment horizon of 90 days Shopify is expected to generate 1.06 times less return on investment than WonderFi Technologies. But when comparing it to its historical volatility, Shopify is 1.58 times less risky than WonderFi Technologies. It trades about 0.34 of its potential returns per unit of risk. WonderFi Technologies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  13.00  in WonderFi Technologies on August 31, 2024 and sell it today you would earn a total of  5.00  from holding WonderFi Technologies or generate 38.46% return on investment over 90 days.

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

Shopify  vs.  WonderFi Technologies

Shopify

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

WonderFi Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WonderFi Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, WonderFi Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shopify and WonderFi Technologies

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

The idea behind Shopify and WonderFi Technologies 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.