Correlation Between Confluent and Alarum Technologies

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

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

Diversification Opportunities for Confluent and Alarum Technologies

0.14

Correlation Coefficient

Confluent  Alarum Technologies

Average diversification

The 3 months correlation between Confluent and Alarum is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Confluent and Alarum Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarum Technologies and Confluent 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 Confluent are associated (or correlated) with Alarum Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarum Technologies has no effect on the direction of Confluent i.e., Confluent and Alarum Technologies go up and down completely randomly.

Pair Corralation between Confluent and Alarum Technologies

Given the investment horizon of 90 days Confluent is expected to generate 0.43 times more return on investment than Alarum Technologies. However, Confluent is 2.32 times less risky than Alarum Technologies. It trades about 0.18 of its potential returns per unit of risk. Alarum Technologies is currently generating about 0.02 per unit of risk. If you would invest  2,066  in Confluent on September 19, 2024 and sell it today you would earn a total of  880.00  from holding Confluent or generate 42.59% return on investment over 90 days.

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

Confluent  vs.  Alarum Technologies

Confluent

Risk-Adjusted Performance

14 of 100

Solid

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

Alarum Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alarum Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Alarum Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Confluent and Alarum Technologies

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

The idea behind Confluent and Alarum Technologies 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.