Correlation Between AvidXchange Holdings and Couchbase

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

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

Diversification Opportunities for AvidXchange Holdings and Couchbase

0.61

Correlation Coefficient

AvidXchange Holdings  Couchbase

Poor diversification

The 3 months correlation between AvidXchange and Couchbase is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding AvidXchange Holdings and Couchbase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Couchbase and AvidXchange 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 AvidXchange Holdings are associated (or correlated) with Couchbase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Couchbase has no effect on the direction of AvidXchange Holdings i.e., AvidXchange Holdings and Couchbase go up and down completely randomly.

Pair Corralation between AvidXchange Holdings and Couchbase

Given the investment horizon of 90 days AvidXchange Holdings is expected to generate 0.79 times more return on investment than Couchbase. However, AvidXchange Holdings is 1.26 times less risky than Couchbase. It trades about -0.03 of its potential returns per unit of risk. Couchbase is currently generating about -0.05 per unit of risk. If you would invest  1,248  in AvidXchange Holdings on February 4, 2024 and sell it today you would lose (42.00) from holding AvidXchange Holdings or give up 3.37% of portfolio value over 90 days.

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

AvidXchange Holdings  vs.  Couchbase

AvidXchange Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AvidXchange Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, AvidXchange Holdings may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Couchbase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Couchbase has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Couchbase is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AvidXchange Holdings and Couchbase

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

The idea behind AvidXchange Holdings and Couchbase 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.