Correlation Between Defentect and Snowflake

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

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

Diversification Opportunities for Defentect and Snowflake

-0.02

Correlation Coefficient

Defentect  Snowflake

Good diversification

The 3 months correlation between Defentect and Snowflake is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Defentect Group and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake and Defentect 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 Defentect Group are associated (or correlated) with Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of Defentect i.e., Defentect and Snowflake go up and down completely randomly.

Pair Corralation between Defentect and Snowflake

Given the investment horizon of 90 days Defentect is expected to generate 11.41 times less return on investment than Snowflake. In addition to that, Defentect is 2.65 times more volatile than Snowflake. It trades about 0.01 of its total potential returns per unit of risk. Snowflake is currently generating about 0.31 per unit of volatility. If you would invest  13,700  in Snowflake on April 21, 2025 and sell it today you would earn a total of  7,989  from holding Snowflake or generate 58.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Defentect Group  vs.  Snowflake

Defentect Group

Risk-Adjusted Performance

Very Weak

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

Snowflake

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Snowflake are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Snowflake showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Defentect and Snowflake

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

The idea behind Defentect Group and Snowflake 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.