Correlation Between Affirm Holdings and Riot Blockchain

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

By analyzing existing cross correlation between Affirm Holdings and Riot Blockchain, you can compare the effects of market volatilities on Affirm Holdings and Riot Blockchain 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 Riot Blockchain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affirm Holdings and Riot Blockchain.

Diversification Opportunities for Affirm Holdings and Riot Blockchain

0.58

Correlation Coefficient

Affirm Holdings  Riot Blockchain

Very weak diversification

The 3 months correlation between Affirm and Riot is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Affirm Holdings and Riot Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riot Blockchain 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 Riot Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riot Blockchain has no effect on the direction of Affirm Holdings i.e., Affirm Holdings and Riot Blockchain go up and down completely randomly.

Pair Corralation between Affirm Holdings and Riot Blockchain

Given the investment horizon of 90 days Affirm Holdings is expected to under-perform the Riot Blockchain. But the stock apears to be less risky and, when comparing its historical volatility, Affirm Holdings is 1.73 times less risky than Riot Blockchain. The stock trades about -0.24 of its potential returns per unit of risk. The Riot Blockchain is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,167  in Riot Blockchain on October 25, 2024 and sell it today you would earn a total of  147.00  from holding Riot Blockchain or generate 12.6% return on investment over 90 days.

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

Affirm Holdings  vs.  Riot Blockchain

Affirm Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Affirm Holdings are ranked lower than 10 (%) 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.

Riot Blockchain

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Riot Blockchain are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Riot Blockchain unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affirm Holdings and Riot Blockchain

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

The idea behind Affirm Holdings and Riot Blockchain 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.