Correlation Between Fair Isaac and Snowflake

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

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

Diversification Opportunities for Fair Isaac and Snowflake

0.31

Correlation Coefficient

Fair Isaac  Snowflake

Weak diversification

The 3 months correlation between Fair and Snowflake is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake and Fair Isaac 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 Fair Isaac are associated (or correlated) with Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of Fair Isaac i.e., Fair Isaac and Snowflake go up and down completely randomly.

Pair Corralation between Fair Isaac and Snowflake

Given the investment horizon of 90 days Fair Isaac is expected to generate 1.32 times more return on investment than Snowflake. However, Fair Isaac is 1.32 times more volatile than Snowflake. It trades about 0.47 of its potential returns per unit of risk. Snowflake is currently generating about 0.31 per unit of risk. If you would invest  115,066  in Fair Isaac on February 21, 2024 and sell it today you would earn a total of  29,562  from holding Fair Isaac or generate 25.69% return on investment over 90 days.

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

Fair Isaac  vs.  Snowflake

Fair Isaac

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Fair Isaac displayed solid returns over the last few months and may actually be approaching a breakup point.

Snowflake

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snowflake has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Fair Isaac and Snowflake

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

The idea behind Fair Isaac and Snowflake 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.