Correlation Between Elastic NV and Trade Desk

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

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

Diversification Opportunities for Elastic NV and Trade Desk

0.77

Correlation Coefficient

Elastic NV  Trade Desk

Poor diversification

The 3 months correlation between Elastic and Trade is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Elastic NV and Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk and Elastic NV 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 Elastic NV are associated (or correlated) with Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Elastic NV i.e., Elastic NV and Trade Desk go up and down completely randomly.

Pair Corralation between Elastic NV and Trade Desk

Given the investment horizon of 90 days Elastic NV is expected to under-perform the Trade Desk. But the stock apears to be less risky and, when comparing its historical volatility, Elastic NV is 1.23 times less risky than Trade Desk. The stock trades about -0.06 of its potential returns per unit of risk. The Trade Desk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,003  in Trade Desk on February 18, 2025 and sell it today you would lose (371.00) from holding Trade Desk or give up 4.64% of portfolio value over 90 days.

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

Elastic NV  vs.  Trade Desk

Elastic NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elastic NV 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 basic indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Trade Desk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Elastic NV and Trade Desk

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

The idea behind Elastic NV and Trade Desk 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.