Correlation Between Affirm Holdings and Network 1

Can any of the company-specific risk be diversified away by investing in both Affirm Holdings and Network 1 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 Affirm Holdings and Network 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affirm Holdings and Network 1 Technologies, you can compare the effects of market volatilities on Affirm Holdings and Network 1 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 Affirm Holdings with a short position of Network 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affirm Holdings and Network 1.

Diversification Opportunities for Affirm Holdings and Network 1

-0.23

Correlation Coefficient

Affirm Holdings  Network 1

Very good diversification

The 3 months correlation between Affirm and Network is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Affirm Holdings and Network 1 Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network 1 Technologies and Affirm 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 Affirm Holdings are associated (or correlated) with Network 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network 1 Technologies has no effect on the direction of Affirm Holdings i.e., Affirm Holdings and Network 1 go up and down completely randomly.

Pair Corralation between Affirm Holdings and Network 1

Given the investment horizon of 90 days Affirm Holdings is expected to generate 2.56 times more return on investment than Network 1. However, Affirm Holdings is 2.56 times more volatile than Network 1 Technologies. It trades about 0.17 of its potential returns per unit of risk. Network 1 Technologies is currently generating about -0.05 per unit of risk. If you would invest  4,116  in Affirm Holdings on September 27, 2024 and sell it today you would earn a total of  2,474  from holding Affirm Holdings or generate 60.11% return on investment over 90 days.

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

Affirm Holdings  vs.  Network 1 Technologies

Affirm Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Affirm Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Affirm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Network 1 Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network 1 Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Network 1 is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Affirm Holdings and Network 1

The main advantage of trading using opposite Affirm Holdings and Network 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affirm Holdings position performs unexpectedly, Network 1 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 Network 1 will offset losses from the drop in Network 1's long position.

The idea behind Affirm Holdings and Network 1 Technologies 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.