Correlation Between Snowflake and Defentect

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

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

Diversification Opportunities for Snowflake and Defentect

-0.02

Correlation Coefficient

Snowflake  Defentect

Good diversification

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

Pair Corralation between Snowflake and Defentect

Given the investment horizon of 90 days Snowflake is expected to generate 0.38 times more return on investment than Defentect. However, Snowflake is 2.65 times less risky than Defentect. It trades about 0.31 of its potential returns per unit of risk. Defentect Group is currently generating about 0.01 per unit of risk. 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

Snowflake  vs.  Defentect Group

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.

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.

Pair Trading with Snowflake and Defentect

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

The idea behind Snowflake and Defentect Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.