Correlation Between Alkami Technology and Cerence

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

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

Diversification Opportunities for Alkami Technology and Cerence

0.23

Correlation Coefficient

Alkami Technology  Cerence

Modest diversification

The 3 months correlation between Alkami and Cerence is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alkami Technology and Cerence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerence and Alkami Technology 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 Alkami Technology are associated (or correlated) with Cerence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerence has no effect on the direction of Alkami Technology i.e., Alkami Technology and Cerence go up and down completely randomly.

Pair Corralation between Alkami Technology and Cerence

Given the investment horizon of 90 days Alkami Technology is expected to generate 1.41 times less return on investment than Cerence. But when comparing it to its historical volatility, Alkami Technology is 3.77 times less risky than Cerence. It trades about 0.08 of its potential returns per unit of risk. Cerence is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,157  in Cerence on October 9, 2024 and sell it today you would lose (139.00) from holding Cerence or give up 6.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Alkami Technology  vs.  Cerence

Alkami Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alkami Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Alkami Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cerence

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cerence are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Cerence exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkami Technology and Cerence

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

The idea behind Alkami Technology and Cerence 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.