Correlation Between Affirm Holdings and Pagaya Technologies

Can any of the company-specific risk be diversified away by investing in both Affirm Holdings and Pagaya 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 Pagaya 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 Pagaya Technologies, you can compare the effects of market volatilities on Affirm Holdings and Pagaya 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 Pagaya Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affirm Holdings and Pagaya Technologies.

Diversification Opportunities for Affirm Holdings and Pagaya Technologies

-0.44

Correlation Coefficient

Affirm Holdings  Pagaya Technologies

Very good diversification

The 3 months correlation between Affirm and Pagaya is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Affirm Holdings and Pagaya Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pagaya 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 Pagaya Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pagaya Technologies has no effect on the direction of Affirm Holdings i.e., Affirm Holdings and Pagaya Technologies go up and down completely randomly.

Pair Corralation between Affirm Holdings and Pagaya Technologies

Given the investment horizon of 90 days Affirm Holdings is expected to under-perform the Pagaya Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Affirm Holdings is 1.07 times less risky than Pagaya Technologies. The stock trades about -0.12 of its potential returns per unit of risk. The Pagaya Technologies is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,025  in Pagaya Technologies on October 10, 2024 and sell it today you would lose (114.50) from holding Pagaya Technologies or give up 11.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Affirm Holdings  vs.  Pagaya Technologies

Affirm Holdings

Risk-Adjusted Performance

11 of 100

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.

Pagaya Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pagaya Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pagaya Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affirm Holdings and Pagaya Technologies

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

The idea behind Affirm Holdings and Pagaya 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.