Correlation Between AvidXchange Holdings and SentinelOne

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

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

Diversification Opportunities for AvidXchange Holdings and SentinelOne

0.56

Correlation Coefficient

AvidXchange Holdings  SentinelOne

Very weak diversification

The 3 months correlation between AvidXchange and SentinelOne is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding AvidXchange Holdings and SentinelOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SentinelOne and AvidXchange Holdings 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 AvidXchange Holdings are associated (or correlated) with SentinelOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SentinelOne has no effect on the direction of AvidXchange Holdings i.e., AvidXchange Holdings and SentinelOne go up and down completely randomly.

Pair Corralation between AvidXchange Holdings and SentinelOne

Given the investment horizon of 90 days AvidXchange Holdings is expected to under-perform the SentinelOne. But the stock apears to be less risky and, when comparing its historical volatility, AvidXchange Holdings is 1.33 times less risky than SentinelOne. The stock trades about -0.11 of its potential returns per unit of risk. The SentinelOne is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,273  in SentinelOne on November 19, 2024 and sell it today you would earn a total of  207.00  from holding SentinelOne or generate 9.11% return on investment over 90 days.

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

AvidXchange Holdings  vs.  SentinelOne

AvidXchange Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days AvidXchange Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, AvidXchange Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SentinelOne

Risk-Adjusted Performance

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with AvidXchange Holdings and SentinelOne

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

The idea behind AvidXchange Holdings and SentinelOne 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.