Correlation Between Pagaya Technologies and Katapult Holdings

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

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

Diversification Opportunities for Pagaya Technologies and Katapult Holdings

0.45

Correlation Coefficient

Pagaya Technologies  Katapult Holdings

Very weak diversification

The 3 months correlation between Pagaya and Katapult is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Pagaya Technologies and Katapult Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Katapult Holdings and Pagaya Technologies 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 Pagaya Technologies are associated (or correlated) with Katapult Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Katapult Holdings has no effect on the direction of Pagaya Technologies i.e., Pagaya Technologies and Katapult Holdings go up and down completely randomly.

Pair Corralation between Pagaya Technologies and Katapult Holdings

Considering the 90-day investment horizon Pagaya Technologies is expected to generate 1.56 times more return on investment than Katapult Holdings. However, Pagaya Technologies is 1.56 times more volatile than Katapult Holdings. It trades about -0.01 of its potential returns per unit of risk. Katapult Holdings is currently generating about -0.13 per unit of risk. If you would invest  1,382  in Pagaya Technologies on September 2, 2024 and sell it today you would lose (289.00) from holding Pagaya Technologies or give up 20.91% of portfolio value over 90 days.

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

Pagaya Technologies  vs.  Katapult Holdings

Pagaya Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pagaya Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Pagaya Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Katapult Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Katapult Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Pagaya Technologies and Katapult Holdings

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

The idea behind Pagaya Technologies and Katapult 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.