Correlation Between Snowflake and Dave

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Can any of the company-specific risk be diversified away by investing in both Snowflake and Dave 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 Snowflake and Dave into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snowflake and Dave Inc, you can compare the effects of market volatilities on Snowflake and Dave 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 Snowflake with a short position of Dave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and Dave.

Diversification Opportunities for Snowflake and Dave

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Snowflake and Dave is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and Dave Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Inc and Snowflake 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 Snowflake are associated (or correlated) with Dave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Inc has no effect on the direction of Snowflake i.e., Snowflake and Dave go up and down completely randomly.

Pair Corralation between Snowflake and Dave

Given the investment horizon of 90 days Snowflake is expected to generate 0.82 times more return on investment than Dave. However, Snowflake is 1.22 times less risky than Dave. It trades about 0.14 of its potential returns per unit of risk. Dave Inc is currently generating about 0.1 per unit of risk. If you would invest  13,842  in Snowflake on October 29, 2022 and sell it today you would earn a total of  1,403  from holding Snowflake or generate 10.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Snowflake  vs.  Dave Inc

 Performance (%) 
       Timeline  
Snowflake 
Snowflake Performance
0 of 100
Over the last 90 days Snowflake has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Snowflake is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Snowflake Price Channel

Dave Inc 
Dave Performance
0 of 100
Over the last 90 days Dave Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Dave is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Dave Price Channel

Snowflake and Dave Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Snowflake and Dave

The main advantage of trading using opposite Snowflake and Dave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snowflake position performs unexpectedly, Dave 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 Dave will offset losses from the drop in Dave's long position.
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The idea behind Snowflake and Dave Inc 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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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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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