Correlation Between ON24 and Alarm Holdings

Can any of the company-specific risk be diversified away by investing in both ON24 and Alarm 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 ON24 and Alarm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ON24 Inc and Alarm Holdings, you can compare the effects of market volatilities on ON24 and Alarm 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 ON24 with a short position of Alarm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON24 and Alarm Holdings.

Diversification Opportunities for ON24 and Alarm Holdings

0.85

Correlation Coefficient

ON24  Alarm Holdings

Very poor diversification

The 3 months correlation between ON24 and Alarm is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ON24 Inc and Alarm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarm Holdings and ON24 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 ON24 Inc are associated (or correlated) with Alarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarm Holdings has no effect on the direction of ON24 i.e., ON24 and Alarm Holdings go up and down completely randomly.

Pair Corralation between ON24 and Alarm Holdings

Given the investment horizon of 90 days ON24 Inc is expected to under-perform the Alarm Holdings. In addition to that, ON24 is 1.66 times more volatile than Alarm Holdings. It trades about -0.11 of its total potential returns per unit of risk. Alarm Holdings is currently generating about -0.07 per unit of volatility. If you would invest  6,106  in Alarm Holdings on December 28, 2024 and sell it today you would lose (330.00) from holding Alarm Holdings or give up 5.4% of portfolio value over 90 days.

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

ON24 Inc  vs.  Alarm Holdings

ON24 Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ON24 Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alarm Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ON24 and Alarm Holdings

The main advantage of trading using opposite ON24 and Alarm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON24 position performs unexpectedly, Alarm 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 Alarm Holdings will offset losses from the drop in Alarm Holdings' long position.

The idea behind ON24 Inc and Alarm 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.