Correlation Between Blackbaud and Appfolio

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

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

Diversification Opportunities for Blackbaud and Appfolio

-0.58

Correlation Coefficient

Blackbaud  Appfolio

Excellent diversification

The 3 months correlation between Blackbaud and Appfolio is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Blackbaud and Appfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appfolio and Blackbaud 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 Blackbaud 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 Blackbaud i.e., Blackbaud and Appfolio go up and down completely randomly.

Pair Corralation between Blackbaud and Appfolio

Given the investment horizon of 90 days Blackbaud is expected to generate 2.52 times less return on investment than Appfolio. But when comparing it to its historical volatility, Blackbaud is 1.38 times less risky than Appfolio. It trades about 0.04 of its potential returns per unit of risk. Appfolio is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,613  in Appfolio on January 25, 2024 and sell it today you would earn a total of  11,977  from holding Appfolio or generate 124.59% return on investment over 90 days.

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

Blackbaud  vs.  Appfolio

Blackbaud

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackbaud has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Blackbaud is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Appfolio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Appfolio are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Appfolio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackbaud and Appfolio

The main advantage of trading using opposite Blackbaud and Appfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackbaud 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 Blackbaud 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.