Correlation Between Affirm Holdings and Alarum Technologies

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Can any of the company-specific risk be diversified away by investing in both Affirm Holdings and Alarum Technologies 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 Affirm Holdings and Alarum Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Affirm Holdings and Alarum Technologies, you can compare the effects of market volatilities on Affirm Holdings and Alarum Technologies 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 Affirm Holdings with a short position of Alarum Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affirm Holdings and Alarum Technologies.

Diversification Opportunities for Affirm Holdings and Alarum Technologies

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Affirm and Alarum is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Affirm Holdings and Alarum Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarum Technologies and Affirm 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 Affirm Holdings are associated (or correlated) with Alarum Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarum Technologies has no effect on the direction of Affirm Holdings i.e., Affirm Holdings and Alarum Technologies go up and down completely randomly.

Pair Corralation between Affirm Holdings and Alarum Technologies

Given the investment horizon of 90 days Affirm Holdings is expected to under-perform the Alarum Technologies. In addition to that, Affirm Holdings is 1.01 times more volatile than Alarum Technologies. It trades about -0.12 of its total potential returns per unit of risk. Alarum Technologies is currently generating about -0.08 per unit of volatility. If you would invest  1,183  in Alarum Technologies on October 10, 2024 and sell it today you would lose (92.00) from holding Alarum Technologies or give up 7.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Affirm Holdings  vs.  Alarum Technologies

 Performance 
       Timeline  
Affirm Holdings 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Affirm Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Affirm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.
Alarum Technologies 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Alarum Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Alarum Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Affirm Holdings and Alarum Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Affirm Holdings and Alarum Technologies

The main advantage of trading using opposite Affirm Holdings and Alarum Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affirm Holdings position performs unexpectedly, Alarum Technologies 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 Alarum Technologies will offset losses from the drop in Alarum Technologies' long position.
The idea behind Affirm Holdings and Alarum Technologies 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.
Check out your portfolio center.
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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