Correlation Between Model N and Appfolio

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

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

Diversification Opportunities for Model N and Appfolio

-0.06

Correlation Coefficient

Model N  Appfolio

Good diversification

The 3 months correlation between Model and Appfolio is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Model N and Appfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appfolio and Model N 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 Model N 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 Model N i.e., Model N and Appfolio go up and down completely randomly.

Pair Corralation between Model N and Appfolio

If you would invest  22,941  in Appfolio on August 31, 2024 and sell it today you would earn a total of  2,471  from holding Appfolio or generate 10.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Model N  vs.  Appfolio

Model N

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Model N has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Model N is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Appfolio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Appfolio are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Appfolio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Model N and Appfolio

The main advantage of trading using opposite Model N and Appfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Model N 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.

The idea behind Model N and Appfolio 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.