Correlation Between LiveChat Software and Appfolio

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

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

Diversification Opportunities for LiveChat Software and Appfolio

-0.43

Correlation Coefficient

LiveChat Software  Appfolio

Very good diversification

The 3 months correlation between LiveChat and Appfolio is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding LiveChat Software SA and Appfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appfolio and LiveChat Software 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 LiveChat Software SA 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 LiveChat Software i.e., LiveChat Software and Appfolio go up and down completely randomly.

Pair Corralation between LiveChat Software and Appfolio

Assuming the 90 days horizon LiveChat Software SA is expected to generate 2.01 times more return on investment than Appfolio. However, LiveChat Software is 2.01 times more volatile than Appfolio. It trades about 0.22 of its potential returns per unit of risk. Appfolio is currently generating about -0.02 per unit of risk. If you would invest  1,101  in LiveChat Software SA on September 27, 2024 and sell it today you would earn a total of  166.00  from holding LiveChat Software SA or generate 15.08% return on investment over 90 days.

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

LiveChat Software SA  vs.  Appfolio

LiveChat Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiveChat Software SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Appfolio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Appfolio are ranked lower than 4 (%) 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 January 2025.

Pair Trading with LiveChat Software and Appfolio

The main advantage of trading using opposite LiveChat Software and Appfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LiveChat Software 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 LiveChat Software SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.