Correlation Between Snowflake and LivePerson

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

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

Diversification Opportunities for Snowflake and LivePerson

-0.56

Correlation Coefficient

Snowflake  LivePerson

Excellent diversification

The 3 months correlation between Snowflake and LivePerson is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and LivePerson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivePerson and Snowflake 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 Snowflake are associated (or correlated) with LivePerson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivePerson has no effect on the direction of Snowflake i.e., Snowflake and LivePerson go up and down completely randomly.

Pair Corralation between Snowflake and LivePerson

Given the investment horizon of 90 days Snowflake is expected to generate 0.74 times more return on investment than LivePerson. However, Snowflake is 1.36 times less risky than LivePerson. It trades about 0.18 of its potential returns per unit of risk. LivePerson is currently generating about -0.02 per unit of risk. If you would invest  11,175  in Snowflake on September 5, 2024 and sell it today you would earn a total of  6,419  from holding Snowflake or generate 57.44% return on investment over 90 days.

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

Snowflake  vs.  LivePerson

Snowflake

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Snowflake are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Snowflake showed solid returns over the last few months and may actually be approaching a breakup point.

LivePerson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LivePerson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Snowflake and LivePerson

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

The idea behind Snowflake and LivePerson 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.