Correlation Between BYTE Acquisition and L Catterton
Can any of the company-specific risk be diversified away by investing in both BYTE Acquisition 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 BYTE Acquisition and L Catterton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYTE Acquisition Corp and L Catterton Asia, you can compare the effects of market volatilities on BYTE Acquisition 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 BYTE Acquisition with a short position of L Catterton. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYTE Acquisition and L Catterton.
Diversification Opportunities for BYTE Acquisition and L Catterton
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BYTE and LCAAW is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BYTE Acquisition Corp 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 BYTE Acquisition 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 BYTE Acquisition Corp 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 BYTE Acquisition i.e., BYTE Acquisition and L Catterton go up and down completely randomly.
Pair Corralation between BYTE Acquisition and L Catterton
Assuming the 90 days horizon BYTE Acquisition is expected to generate 1.71 times less return on investment than L Catterton. But when comparing it to its historical volatility, BYTE Acquisition Corp is 2.38 times less risky than L Catterton. It trades about 0.18 of its potential returns per unit of risk. L Catterton Asia is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.95 in L Catterton Asia on August 26, 2024 and sell it today you would earn a total of 48.05 from holding L Catterton Asia or generate 5057.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.83% |
| Values | Daily Returns |
BYTE Acquisition Corp vs. L Catterton Asia
Performance |
| Timeline |
| BYTE Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| L Catterton Asia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
BYTE Acquisition and L Catterton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYTE Acquisition and L Catterton
The main advantage of trading using opposite BYTE Acquisition and L Catterton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYTE Acquisition 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.The idea behind BYTE Acquisition Corp and L Catterton Asia 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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