Correlation Between Splunk and Confluent

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

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

Diversification Opportunities for Splunk and Confluent

0.82

Correlation Coefficient

Splunk  Confluent

Very poor diversification

The 3 months correlation between Splunk and Confluent is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Splunk Inc and Confluent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Confluent and Splunk 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 Splunk Inc are associated (or correlated) with Confluent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Confluent has no effect on the direction of Splunk i.e., Splunk and Confluent go up and down completely randomly.

Pair Corralation between Splunk and Confluent

If you would invest  1,939  in Confluent on September 12, 2024 and sell it today you would earn a total of  1,179  from holding Confluent or generate 60.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

Splunk Inc  vs.  Confluent

Splunk Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Splunk Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Splunk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Confluent

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Splunk and Confluent

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

The idea behind Splunk Inc and Confluent 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.