Correlation Between New Relic and Godaddy

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

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

Diversification Opportunities for New Relic and Godaddy

0.87

Correlation Coefficient

New Relic  Godaddy

Very poor diversification

The 3 months correlation between New and Godaddy is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding New Relic and Godaddy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Godaddy and New Relic 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 New Relic are associated (or correlated) with Godaddy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Godaddy has no effect on the direction of New Relic i.e., New Relic and Godaddy go up and down completely randomly.

Pair Corralation between New Relic and Godaddy

Given the investment horizon of 90 days New Relic is expected to generate 1.94 times less return on investment than Godaddy. In addition to that, New Relic is 1.26 times more volatile than Godaddy. It trades about 0.07 of its total potential returns per unit of risk. Godaddy is currently generating about 0.16 per unit of volatility. If you would invest  7,186  in Godaddy on February 10, 2024 and sell it today you would earn a total of  6,007  from holding Godaddy or generate 83.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	49.6%
Values	Daily Returns

New Relic  vs.  Godaddy

New Relic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Relic has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, New Relic is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Godaddy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Godaddy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Godaddy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Relic and Godaddy

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

The idea behind New Relic and Godaddy 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.