Correlation Between Affirm Holdings and StoneCo

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

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

Diversification Opportunities for Affirm Holdings and StoneCo

-0.32

Correlation Coefficient

Affirm Holdings  StoneCo

Very good diversification

The 3 months correlation between Affirm and StoneCo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Affirm Holdings and StoneCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StoneCo and Affirm Holdings 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 Affirm Holdings are associated (or correlated) with StoneCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StoneCo has no effect on the direction of Affirm Holdings i.e., Affirm Holdings and StoneCo go up and down completely randomly.

Pair Corralation between Affirm Holdings and StoneCo

Given the investment horizon of 90 days Affirm Holdings is expected to under-perform the StoneCo. In addition to that, Affirm Holdings is 1.61 times more volatile than StoneCo. It trades about -0.14 of its total potential returns per unit of risk. StoneCo is currently generating about 0.13 per unit of volatility. If you would invest  819.00  in StoneCo on January 4, 2025 and sell it today you would earn a total of  239.00  from holding StoneCo or generate 29.18% return on investment over 90 days.

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

Affirm Holdings  vs.  StoneCo

Affirm Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affirm Holdings 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 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

StoneCo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in StoneCo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, StoneCo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affirm Holdings and StoneCo

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

The idea behind Affirm Holdings and StoneCo 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.