Correlation Between Cloudflare and Affirm Holdings

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

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

Diversification Opportunities for Cloudflare and Affirm Holdings

0.86

Correlation Coefficient

Cloudflare  Affirm Holdings

Very poor diversification

The 3 months correlation between Cloudflare and Affirm is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cloudflare and Affirm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affirm Holdings and Cloudflare 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 Cloudflare are associated (or correlated) with Affirm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affirm Holdings has no effect on the direction of Cloudflare i.e., Cloudflare and Affirm Holdings go up and down completely randomly.

Pair Corralation between Cloudflare and Affirm Holdings

Considering the 90-day investment horizon Cloudflare is expected to generate 0.59 times more return on investment than Affirm Holdings. However, Cloudflare is 1.71 times less risky than Affirm Holdings. It trades about 0.36 of its potential returns per unit of risk. Affirm Holdings is currently generating about 0.15 per unit of risk. If you would invest  12,078  in Cloudflare on April 30, 2025 and sell it today you would earn a total of  7,865  from holding Cloudflare or generate 65.12% return on investment over 90 days.

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

Cloudflare  vs.  Affirm Holdings

Cloudflare

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudflare are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Cloudflare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Affirm Holdings

Risk-Adjusted Performance

Good

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

Pair Trading with Cloudflare and Affirm Holdings

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

The idea behind Cloudflare and Affirm 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.