Correlation Between GSR II and HCM Acquisition
Can any of the company-specific risk be diversified away by investing in both GSR II and HCM Acquisition 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 GSR II and HCM Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GSR II Meteora and HCM Acquisition Corp, you can compare the effects of market volatilities on GSR II and HCM Acquisition 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 GSR II with a short position of HCM Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSR II and HCM Acquisition.
Diversification Opportunities for GSR II and HCM Acquisition
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GSR and HCM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding GSR II Meteora and HCM Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Acquisition Corp and GSR II 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 GSR II Meteora are associated (or correlated) with HCM Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Acquisition Corp has no effect on the direction of GSR II i.e., GSR II and HCM Acquisition go up and down completely randomly.
Pair Corralation between GSR II and HCM Acquisition
Assuming the 90 days horizon GSR II Meteora is expected to generate 57.8 times more return on investment than HCM Acquisition. However, GSR II is 57.8 times more volatile than HCM Acquisition Corp. It trades about 0.2 of its potential returns per unit of risk. HCM Acquisition Corp is currently generating about -0.09 per unit of risk. If you would invest 9.78 in GSR II Meteora on September 2, 2024 and sell it today you would earn a total of 4.22 from holding GSR II Meteora or generate 43.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 50.0% |
| Values | Daily Returns |
GSR II Meteora vs. HCM Acquisition Corp
Performance |
| Timeline |
| GSR II Meteora |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| HCM Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GSR II and HCM Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GSR II and HCM Acquisition
The main advantage of trading using opposite GSR II and HCM Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSR II position performs unexpectedly, HCM Acquisition 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 HCM Acquisition will offset losses from the drop in HCM Acquisition's long position.The idea behind GSR II Meteora and HCM Acquisition Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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