Correlation Between Affirm Holdings and Upstart Holdings

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

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

Diversification Opportunities for Affirm Holdings and Upstart Holdings

0.92

Correlation Coefficient

Affirm Holdings  Upstart Holdings

Almost no diversification

The 3 months correlation between Affirm and Upstart is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Affirm Holdings and Upstart Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upstart Holdings 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 Upstart Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upstart Holdings has no effect on the direction of Affirm Holdings i.e., Affirm Holdings and Upstart Holdings go up and down completely randomly.

Pair Corralation between Affirm Holdings and Upstart Holdings

Given the investment horizon of 90 days Affirm Holdings is expected to generate 1.28 times less return on investment than Upstart Holdings. But when comparing it to its historical volatility, Affirm Holdings is 1.45 times less risky than Upstart Holdings. It trades about 0.16 of its potential returns per unit of risk. Upstart Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,089  in Upstart Holdings on September 26, 2024 and sell it today you would earn a total of  2,823  from holding Upstart Holdings or generate 69.04% return on investment over 90 days.

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

Affirm Holdings  vs.  Upstart Holdings

Affirm Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Affirm Holdings are ranked lower than 12 (%) 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.

Upstart Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Upstart Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Upstart Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affirm Holdings and Upstart Holdings

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

The idea behind Affirm Holdings and Upstart 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.