Correlation Between Alarum Technologies and Affirm Holdings

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

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

Diversification Opportunities for Alarum Technologies and Affirm Holdings

-0.26

Correlation Coefficient

Alarum Technologies  Affirm Holdings

Very good diversification

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

Pair Corralation between Alarum Technologies and Affirm Holdings

Given the investment horizon of 90 days Alarum Technologies is expected to generate 0.99 times more return on investment than Affirm Holdings. However, Alarum Technologies is 1.01 times less risky than Affirm Holdings. It trades about -0.08 of its potential returns per unit of risk. Affirm Holdings is currently generating about -0.12 per unit of risk. 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 Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alarum Technologies  vs.  Affirm Holdings

Alarum Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alarum Technologies are ranked lower than 5 (%) 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

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.

Pair Trading with Alarum Technologies and Affirm Holdings

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

The idea behind Alarum Technologies and Affirm Holdings 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.