Correlation Between Sprout Social and Riskified

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

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

Diversification Opportunities for Sprout Social and Riskified

0.72

Correlation Coefficient

Sprout Social  Riskified

Poor diversification

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

Pair Corralation between Sprout Social and Riskified

Considering the 90-day investment horizon Sprout Social is expected to generate 1.51 times more return on investment than Riskified. However, Sprout Social is 1.51 times more volatile than Riskified. It trades about 0.11 of its potential returns per unit of risk. Riskified is currently generating about 0.01 per unit of risk. 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

Sprout Social  vs.  Riskified

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.

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.

Pair Trading with Sprout Social and Riskified

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

The idea behind Sprout Social and Riskified 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.