Correlation Between DocuSign and Sprout Social

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

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

Diversification Opportunities for DocuSign and Sprout Social

0.27

Correlation Coefficient

DocuSign  Sprout Social

Modest diversification

The 3 months correlation between DocuSign and Sprout is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding DocuSign and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social and DocuSign 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 DocuSign are associated (or correlated) with Sprout Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprout Social has no effect on the direction of DocuSign i.e., DocuSign and Sprout Social go up and down completely randomly.

Pair Corralation between DocuSign and Sprout Social

Given the investment horizon of 90 days DocuSign is expected to generate 0.79 times more return on investment than Sprout Social. However, DocuSign is 1.26 times less risky than Sprout Social. It trades about 0.0 of its potential returns per unit of risk. Sprout Social is currently generating about -0.01 per unit of risk. If you would invest  6,619  in DocuSign on March 17, 2024 and sell it today you would lose (1,535) from holding DocuSign or give up 23.19% of portfolio value over 90 days.

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

DocuSign  vs.  Sprout Social

DocuSign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DocuSign has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Sprout Social

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprout Social has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with DocuSign and Sprout Social

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

The idea behind DocuSign and Sprout Social 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.