Correlation Between Appen and Banxa Holdings

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

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

Diversification Opportunities for Appen and Banxa Holdings

0.43

Correlation Coefficient

Appen  Banxa Holdings

Very weak diversification

The 3 months correlation between Appen and Banxa is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Appen Limited and Banxa Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banxa Holdings and Appen 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 Appen Limited are associated (or correlated) with Banxa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banxa Holdings has no effect on the direction of Appen i.e., Appen and Banxa Holdings go up and down completely randomly.

Pair Corralation between Appen and Banxa Holdings

Assuming the 90 days horizon Appen Limited is expected to generate 0.55 times more return on investment than Banxa Holdings. However, Appen Limited is 1.81 times less risky than Banxa Holdings. It trades about 0.15 of its potential returns per unit of risk. Banxa Holdings is currently generating about 0.04 per unit of risk. If you would invest  144.00  in Appen Limited on December 2, 2024 and sell it today you would earn a total of  40.00  from holding Appen Limited or generate 27.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.02%
Values	Daily Returns

Appen Limited  vs.  Banxa Holdings

Appen Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Appen Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Appen reported solid returns over the last few months and may actually be approaching a breakup point.

Banxa Holdings

Risk-Adjusted Performance

Modest

Over the last 90 days Banxa Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Banxa Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Appen and Banxa Holdings

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

The idea behind Appen Limited and Banxa 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.