Correlation Between Gen Digital and Cloudflare

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

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

Diversification Opportunities for Gen Digital and Cloudflare

0.85

Correlation Coefficient

Gen Digital  Cloudflare

Very poor diversification

The 3 months correlation between Gen and Cloudflare is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital Contingent and Cloudflare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloudflare and Gen Digital 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 Gen Digital Contingent 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 Gen Digital i.e., Gen Digital and Cloudflare go up and down completely randomly.

Pair Corralation between Gen Digital and Cloudflare

Assuming the 90 days horizon Gen Digital Contingent is expected to generate 2.65 times more return on investment than Cloudflare. However, Gen Digital is 2.65 times more volatile than Cloudflare. It trades about 0.18 of its potential returns per unit of risk. Cloudflare is currently generating about 0.35 per unit of risk. If you would invest  526.00  in Gen Digital Contingent on May 1, 2025 and sell it today you would earn a total of  424.00  from holding Gen Digital Contingent or generate 80.61% return on investment over 90 days.

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

Gen Digital Contingent  vs.  Cloudflare

Gen Digital Contingent

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital Contingent are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gen Digital reported solid returns over the last few months and may actually be approaching a breakup point.

Cloudflare

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudflare are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Cloudflare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gen Digital and Cloudflare

The main advantage of trading using opposite Gen Digital and Cloudflare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gen Digital 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 Gen Digital Contingent 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.