Correlation Between Pagaya Technologies and Bakkt Holdings

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

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

Diversification Opportunities for Pagaya Technologies and Bakkt Holdings

-0.55

Correlation Coefficient

Pagaya Technologies  Bakkt Holdings

Excellent diversification

The 3 months correlation between Pagaya and Bakkt is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pagaya Technologies and Bakkt Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakkt Holdings and Pagaya Technologies 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 Pagaya Technologies are associated (or correlated) with Bakkt Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakkt Holdings has no effect on the direction of Pagaya Technologies i.e., Pagaya Technologies and Bakkt Holdings go up and down completely randomly.

Pair Corralation between Pagaya Technologies and Bakkt Holdings

Considering the 90-day investment horizon Pagaya Technologies is expected to generate 0.71 times more return on investment than Bakkt Holdings. However, Pagaya Technologies is 1.4 times less risky than Bakkt Holdings. It trades about 0.08 of its potential returns per unit of risk. Bakkt Holdings is currently generating about -0.13 per unit of risk. If you would invest  965.00  in Pagaya Technologies on December 27, 2024 and sell it today you would earn a total of  193.00  from holding Pagaya Technologies or generate 20.0% return on investment over 90 days.

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

Pagaya Technologies  vs.  Bakkt Holdings

Pagaya Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pagaya Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pagaya Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Bakkt Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bakkt Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Pagaya Technologies and Bakkt Holdings

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

The idea behind Pagaya Technologies and Bakkt 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.