Correlation Between Square and MongoDB

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

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

Diversification Opportunities for Square and MongoDB

0.85

Correlation Coefficient

Square  MongoDB

Very poor diversification

The 3 months correlation between Square and MongoDB is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Square Inc and MongoDB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MongoDB and Square 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 Square Inc are associated (or correlated) with MongoDB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MongoDB has no effect on the direction of Square i.e., Square and MongoDB go up and down completely randomly.

Pair Corralation between Square and MongoDB

Assuming the 90 days horizon Square Inc is expected to generate 1.02 times more return on investment than MongoDB. However, Square is 1.02 times more volatile than MongoDB. It trades about 0.29 of its potential returns per unit of risk. MongoDB is currently generating about 0.21 per unit of risk. If you would invest  4,114  in Square Inc on May 1, 2025 and sell it today you would earn a total of  2,644  from holding Square Inc or generate 64.27% return on investment over 90 days.

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

Square Inc  vs.  MongoDB

Square Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Square Inc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Square reported solid returns over the last few months and may actually be approaching a breakup point.

MongoDB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MongoDB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MongoDB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Square and MongoDB

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

The idea behind Square Inc and MongoDB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.