Correlation Between GigaCloud Technology and AvidXchange Holdings

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

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

Diversification Opportunities for GigaCloud Technology and AvidXchange Holdings

0.32

Correlation Coefficient

GigaCloud Technology  AvidXchange Holdings

Weak diversification

The 3 months correlation between GigaCloud and AvidXchange is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding GigaCloud Technology Class and AvidXchange Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvidXchange Holdings and GigaCloud Technology 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 GigaCloud Technology Class 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 GigaCloud Technology i.e., GigaCloud Technology and AvidXchange Holdings go up and down completely randomly.

Pair Corralation between GigaCloud Technology and AvidXchange Holdings

Considering the 90-day investment horizon GigaCloud Technology is expected to generate 3.42 times less return on investment than AvidXchange Holdings. In addition to that, GigaCloud Technology is 2.0 times more volatile than AvidXchange Holdings. It trades about 0.06 of its total potential returns per unit of risk. AvidXchange Holdings is currently generating about 0.44 per unit of volatility. If you would invest  838.00  in AvidXchange Holdings on September 5, 2024 and sell it today you would earn a total of  293.00  from holding AvidXchange Holdings or generate 34.96% return on investment over 90 days.

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

GigaCloud Technology Class  vs.  AvidXchange Holdings

GigaCloud Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GigaCloud Technology Class are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, GigaCloud Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

AvidXchange Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AvidXchange Holdings are ranked lower than 18 (%) 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 GigaCloud Technology and AvidXchange Holdings

The main advantage of trading using opposite GigaCloud Technology and AvidXchange Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaCloud Technology 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 GigaCloud Technology Class 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.