Correlation Between Appfolio and Alight
Can any of the company-specific risk be diversified away by investing in both Appfolio and Alight 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 Appfolio and Alight into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Appfolio and Alight Inc, you can compare the effects of market volatilities on Appfolio and Alight 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 Appfolio with a short position of Alight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Appfolio and Alight.
Diversification Opportunities for Appfolio and Alight
Very weak diversification
The 3 months correlation between Appfolio and Alight is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Appfolio and Alight Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alight Inc and Appfolio 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 Appfolio are associated (or correlated) with Alight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alight Inc has no effect on the direction of Appfolio i.e., Appfolio and Alight go up and down completely randomly.
Pair Corralation between Appfolio and Alight
Given the investment horizon of 90 days Appfolio is expected to generate 0.52 times more return on investment than Alight. However, Appfolio is 1.94 times less risky than Alight. It trades about 0.42 of its potential returns per unit of risk. Alight Inc is currently generating about 0.16 per unit of risk. If you would invest 21,037 in Appfolio on August 28, 2024 and sell it today you would earn a total of 4,069 from holding Appfolio or generate 19.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Appfolio vs. Alight Inc
Performance |
| Timeline |
| Appfolio |
| Alight Inc |
Appfolio and Alight Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Appfolio and Alight
The main advantage of trading using opposite Appfolio and Alight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Appfolio position performs unexpectedly, Alight 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 Alight will offset losses from the drop in Alight's long position.The idea behind Appfolio and Alight 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.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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