Correlation Between Doma Holdings and Offerpad Solutions

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

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

Diversification Opportunities for Doma Holdings and Offerpad Solutions

0.31

Correlation Coefficient

Doma Holdings  Offerpad Solutions

Weak diversification

The 3 months correlation between Doma and Offerpad is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Doma Holdings and Offerpad Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Offerpad Solutions and Doma 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 Doma Holdings are associated (or correlated) with Offerpad Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Offerpad Solutions has no effect on the direction of Doma Holdings i.e., Doma Holdings and Offerpad Solutions go up and down completely randomly.

Pair Corralation between Doma Holdings and Offerpad Solutions

Given the investment horizon of 90 days Doma Holdings is expected to generate 0.97 times more return on investment than Offerpad Solutions. However, Doma Holdings is 1.03 times less risky than Offerpad Solutions. It trades about 0.01 of its potential returns per unit of risk. Offerpad Solutions is currently generating about 0.0 per unit of risk. If you would invest  1,120  in Doma Holdings on September 3, 2024 and sell it today you would lose (492.00) from holding Doma Holdings or give up 43.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.53%
Values	Daily Returns

Doma Holdings  vs.  Offerpad Solutions

Doma Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Doma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat uncertain primary indicators, Doma Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Offerpad Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Offerpad Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Offerpad Solutions exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doma Holdings and Offerpad Solutions

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

The idea behind Doma Holdings and Offerpad Solutions 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.