Correlation Between VeriSign and Confluent

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

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

Diversification Opportunities for VeriSign and Confluent

-0.28

Correlation Coefficient

VeriSign  Confluent

Very good diversification

The 3 months correlation between VeriSign and Confluent is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Confluent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Confluent and VeriSign 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 VeriSign are associated (or correlated) with Confluent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Confluent has no effect on the direction of VeriSign i.e., VeriSign and Confluent go up and down completely randomly.

Pair Corralation between VeriSign and Confluent

Given the investment horizon of 90 days VeriSign is expected to under-perform the Confluent. But the stock apears to be less risky and, when comparing its historical volatility, VeriSign is 1.59 times less risky than Confluent. The stock trades about -0.28 of its potential returns per unit of risk. The Confluent is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,984  in Confluent on January 30, 2024 and sell it today you would lose (9.00) from holding Confluent or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

VeriSign  vs.  Confluent

VeriSign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VeriSign has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Confluent

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VeriSign and Confluent

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

The idea behind VeriSign and Confluent 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.