Correlation Between Informatica and AvidXchange Holdings

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

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

Diversification Opportunities for Informatica and AvidXchange Holdings

0.32

Correlation Coefficient

Informatica  AvidXchange Holdings

Weak diversification

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

Pair Corralation between Informatica and AvidXchange Holdings

Given the investment horizon of 90 days Informatica is expected to under-perform the AvidXchange Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Informatica is 1.45 times less risky than AvidXchange Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The AvidXchange Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,285  in AvidXchange Holdings on September 20, 2024 and sell it today you would lose (222.00) from holding AvidXchange Holdings or give up 17.28% of portfolio value over 90 days.

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

Informatica  vs.  AvidXchange Holdings

Informatica

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Informatica are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Informatica is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 Informatica and AvidXchange Holdings

The main advantage of trading using opposite Informatica and AvidXchange Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Informatica 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 Informatica 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.