Correlation Between Confluent and AvidXchange Holdings

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

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

Diversification Opportunities for Confluent and AvidXchange Holdings

0.95

Correlation Coefficient

Confluent  AvidXchange Holdings

Almost no diversification

The 3 months correlation between Confluent and AvidXchange is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Confluent and AvidXchange Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvidXchange Holdings 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 AvidXchange Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvidXchange Holdings has no effect on the direction of Confluent i.e., Confluent and AvidXchange Holdings go up and down completely randomly.

Pair Corralation between Confluent and AvidXchange Holdings

Given the investment horizon of 90 days Confluent is expected to generate 1.66 times more return on investment than AvidXchange Holdings. However, Confluent is 1.66 times more volatile than AvidXchange Holdings. It trades about 0.04 of its potential returns per unit of risk. AvidXchange Holdings is currently generating about 0.01 per unit of risk. If you would invest  2,829  in Confluent on September 20, 2024 and sell it today you would earn a total of  49.00  from holding Confluent or generate 1.73% return on investment over 90 days.

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

Confluent  vs.  AvidXchange Holdings

Confluent

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

AvidXchange Holdings

Risk-Adjusted Performance

14 of 100

Solid

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

Pair Trading with Confluent and AvidXchange Holdings

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

The idea behind Confluent and AvidXchange 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 CEOs Directory module to screen CEOs from public companies around the world.