Correlation Between EGain and Appfolio

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

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

Diversification Opportunities for EGain and Appfolio

0.25

Correlation Coefficient

EGain  Appfolio

Modest diversification

The 3 months correlation between EGain and Appfolio is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding eGain and Appfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appfolio and EGain 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 eGain are associated (or correlated) with Appfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appfolio has no effect on the direction of EGain i.e., EGain and Appfolio go up and down completely randomly.

Pair Corralation between EGain and Appfolio

Given the investment horizon of 90 days eGain is expected to under-perform the Appfolio. In addition to that, EGain is 1.1 times more volatile than Appfolio. It trades about -0.03 of its total potential returns per unit of risk. Appfolio is currently generating about 0.08 per unit of volatility. If you would invest  11,207  in Appfolio on August 31, 2024 and sell it today you would earn a total of  14,168  from holding Appfolio or generate 126.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

eGain  vs.  Appfolio

eGain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eGain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Appfolio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Appfolio are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Appfolio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with EGain and Appfolio

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

The idea behind eGain and Appfolio 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.