Correlation Between Endava and Cloudflare

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

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

Diversification Opportunities for Endava and Cloudflare

0.38

Correlation Coefficient

Endava  Cloudflare

Weak diversification

The 3 months correlation between Endava and Cloudflare is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Endava and Cloudflare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloudflare and Endava 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 Endava are associated (or correlated) with Cloudflare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloudflare has no effect on the direction of Endava i.e., Endava and Cloudflare go up and down completely randomly.

Pair Corralation between Endava and Cloudflare

Given the investment horizon of 90 days Endava is expected to generate 0.7 times more return on investment than Cloudflare. However, Endava is 1.43 times less risky than Cloudflare. It trades about -0.43 of its potential returns per unit of risk. Cloudflare is currently generating about -0.36 per unit of risk. If you would invest  2,343  in Endava on January 4, 2025 and sell it today you would lose (610.00) from holding Endava or give up 26.03% of portfolio value over 90 days.

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

Endava  vs.  Cloudflare

Endava

Risk-Adjusted Performance

Very Weak

Over the last 90 days Endava has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cloudflare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cloudflare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Cloudflare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Endava and Cloudflare

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

The idea behind Endava and Cloudflare 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.