Correlation Between Alight and Affirm Holdings

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

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

Diversification Opportunities for Alight and Affirm Holdings

0.67

Correlation Coefficient

Alight  Affirm Holdings

Poor diversification

The 3 months correlation between Alight and Affirm is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alight Inc and Affirm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affirm Holdings and Alight 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 Alight Inc 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 Alight i.e., Alight and Affirm Holdings go up and down completely randomly.

Pair Corralation between Alight and Affirm Holdings

Given the investment horizon of 90 days Alight Inc is expected to under-perform the Affirm Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Alight Inc is 2.72 times less risky than Affirm Holdings. The stock trades about -0.29 of its potential returns per unit of risk. The Affirm Holdings is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  5,321  in Affirm Holdings on September 15, 2024 and sell it today you would earn a total of  1,556  from holding Affirm Holdings or generate 29.24% return on investment over 90 days.

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

Alight Inc  vs.  Affirm Holdings

Alight Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alight Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Alight is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Affirm Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Affirm Holdings are ranked lower than 12 (%) 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 Alight and Affirm Holdings

The main advantage of trading using opposite Alight and Affirm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alight 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 Alight Inc 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.