Correlation Between Alarum Technologies and AvidXchange Holdings

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

Diversification Opportunities for Alarum Technologies and AvidXchange Holdings

0.32

Correlation Coefficient

Alarum Technologies  AvidXchange Holdings

Weak diversification

The 3 months correlation between Alarum and AvidXchange is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alarum Technologies and AvidXchange Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvidXchange 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 AvidXchange Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvidXchange Holdings has no effect on the direction of Alarum Technologies i.e., Alarum Technologies and AvidXchange Holdings go up and down completely randomly.

Pair Corralation between Alarum Technologies and AvidXchange Holdings

Given the investment horizon of 90 days Alarum Technologies is expected to under-perform the AvidXchange Holdings. In addition to that, Alarum Technologies is 1.8 times more volatile than AvidXchange Holdings. It trades about -0.07 of its total potential returns per unit of risk. AvidXchange Holdings is currently generating about 0.44 per unit of volatility. If you would invest  838.00  in AvidXchange Holdings on September 5, 2024 and sell it today you would earn a total of  293.00  from holding AvidXchange Holdings or generate 34.96% return on investment over 90 days.

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

Alarum Technologies  vs.  AvidXchange Holdings

Alarum Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

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.

AvidXchange Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AvidXchange Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, AvidXchange Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alarum Technologies and AvidXchange Holdings

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

The idea behind Alarum Technologies and AvidXchange 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.