Correlation Between Better World and L Catterton
Can any of the company-specific risk be diversified away by investing in both Better World and L Catterton 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 Better World and L Catterton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Better World Acquisition and L Catterton Asia, you can compare the effects of market volatilities on Better World and L Catterton 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 Better World with a short position of L Catterton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better World and L Catterton.
Diversification Opportunities for Better World and L Catterton
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Better and LCAA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Better World Acquisition and L Catterton Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Catterton Asia and Better World 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 Better World Acquisition are associated (or correlated) with L Catterton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Catterton Asia has no effect on the direction of Better World i.e., Better World and L Catterton go up and down completely randomly.
Pair Corralation between Better World and L Catterton
Given the investment horizon of 90 days Better World Acquisition is expected to generate 0.73 times more return on investment than L Catterton. However, Better World Acquisition is 1.37 times less risky than L Catterton. It trades about 0.2 of its potential returns per unit of risk. L Catterton Asia is currently generating about 0.14 per unit of risk. If you would invest 1,041 in Better World Acquisition on August 25, 2024 and sell it today you would earn a total of 50.00 from holding Better World Acquisition or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.34% |
| Values | Daily Returns |
Better World Acquisition vs. L Catterton Asia
Performance |
| Timeline |
| Better World Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| L Catterton Asia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Better World and L Catterton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Better World and L Catterton
The main advantage of trading using opposite Better World and L Catterton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Better World position performs unexpectedly, L Catterton 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 L Catterton will offset losses from the drop in L Catterton's long position.| Better World vs. Insight Acquisition Corp | Better World vs. ClimateRock Class A | Better World vs. Oak Woods Acquisition |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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