Correlation Between Alarm Holdings and Appfolio
Can any of the company-specific risk be diversified away by investing in both Alarm Holdings 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 Alarm Holdings and Appfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alarm Holdings and Appfolio, you can compare the effects of market volatilities on Alarm Holdings 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 Alarm Holdings with a short position of Appfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alarm Holdings and Appfolio.
Diversification Opportunities for Alarm Holdings and Appfolio
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alarm and Appfolio is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Alarm Holdings and Appfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appfolio and Alarm Holdings 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 Alarm Holdings 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 Alarm Holdings i.e., Alarm Holdings and Appfolio go up and down completely randomly.
Pair Corralation between Alarm Holdings and Appfolio
Given the investment horizon of 90 days Alarm Holdings is expected to generate 3.47 times less return on investment than Appfolio. But when comparing it to its historical volatility, Alarm Holdings is 2.12 times less risky than Appfolio. It trades about 0.12 of its potential returns per unit of risk. Appfolio is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 24,723 in Appfolio on October 30, 2024 and sell it today you would earn a total of 1,863 from holding Appfolio or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alarm Holdings vs. Appfolio
Performance |
| Timeline |
| Alarm Holdings |
| Appfolio |
Alarm Holdings and Appfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alarm Holdings and Appfolio
The main advantage of trading using opposite Alarm Holdings and Appfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alarm Holdings 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.| Alarm Holdings vs. Paycor HCM | Alarm Holdings vs. Appfolio | Alarm Holdings vs. Agilysys | Alarm Holdings vs. Alkami Technology |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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