Correlation Between DigitalOcean Holdings and Crowdstrike Holdings

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

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

Diversification Opportunities for DigitalOcean Holdings and Crowdstrike Holdings

-0.6

Correlation Coefficient

DigitalOcean Holdings  Crowdstrike Holdings

Excellent diversification

The 3 months correlation between DigitalOcean and Crowdstrike is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding DigitalOcean Holdings and Crowdstrike Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crowdstrike Holdings and DigitalOcean 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 DigitalOcean Holdings are associated (or correlated) with Crowdstrike Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crowdstrike Holdings has no effect on the direction of DigitalOcean Holdings i.e., DigitalOcean Holdings and Crowdstrike Holdings go up and down completely randomly.

Pair Corralation between DigitalOcean Holdings and Crowdstrike Holdings

Given the investment horizon of 90 days DigitalOcean Holdings is expected to under-perform the Crowdstrike Holdings. But the stock apears to be less risky and, when comparing its historical volatility, DigitalOcean Holdings is 1.22 times less risky than Crowdstrike Holdings. The stock trades about -0.19 of its potential returns per unit of risk. The Crowdstrike Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  36,368  in Crowdstrike Holdings on September 26, 2024 and sell it today you would earn a total of  211.00  from holding Crowdstrike Holdings or generate 0.58% return on investment over 90 days.

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

DigitalOcean Holdings  vs.  Crowdstrike Holdings

DigitalOcean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigitalOcean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Crowdstrike Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crowdstrike Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Crowdstrike Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DigitalOcean Holdings and Crowdstrike Holdings

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

The idea behind DigitalOcean Holdings and Crowdstrike Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.