Correlation Between Model N and Latch

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

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

Diversification Opportunities for Model N and Latch

0.51

Correlation Coefficient

Model N  Latch

Very weak diversification

The 3 months correlation between Model and Latch is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Model N and Latch Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latch Inc and Model N 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 Model N are associated (or correlated) with Latch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latch Inc has no effect on the direction of Model N i.e., Model N and Latch go up and down completely randomly.

Pair Corralation between Model N and Latch

If you would invest  172.00  in Latch Inc on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Latch Inc or generate 0.0% return on investment over 90 days.

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

Model N  vs.  Latch Inc

Model N

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Model N has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Model N is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Latch Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Latch Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Latch is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Model N and Latch

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

The idea behind Model N and Latch Inc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.