Correlation Between Pono Capital and Finnovate Acquisition
Can any of the company-specific risk be diversified away by investing in both Pono Capital and Finnovate 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 Pono Capital and Finnovate Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pono Capital Two and Finnovate Acquisition Corp, you can compare the effects of market volatilities on Pono Capital and Finnovate 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 Pono Capital with a short position of Finnovate Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pono Capital and Finnovate Acquisition.
Diversification Opportunities for Pono Capital and Finnovate Acquisition
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pono and Finnovate is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pono Capital Two and Finnovate Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnovate Acquisition and Pono Capital 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 Pono Capital Two are associated (or correlated) with Finnovate Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnovate Acquisition has no effect on the direction of Pono Capital i.e., Pono Capital and Finnovate Acquisition go up and down completely randomly.
Pair Corralation between Pono Capital and Finnovate Acquisition
Assuming the 90 days horizon Pono Capital Two is expected to generate 34.39 times more return on investment than Finnovate Acquisition. However, Pono Capital is 34.39 times more volatile than Finnovate Acquisition Corp. It trades about 0.03 of its potential returns per unit of risk. Finnovate Acquisition Corp is currently generating about 0.1 per unit of risk. If you would invest 1,245 in Pono Capital Two on November 5, 2024 and sell it today you would lose (45.00) from holding Pono Capital Two or give up 3.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 65.38% |
| Values | Daily Returns |
Pono Capital Two vs. Finnovate Acquisition Corp
Performance |
| Timeline |
| Pono Capital Two |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Finnovate Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Pono Capital and Finnovate Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pono Capital and Finnovate Acquisition
The main advantage of trading using opposite Pono Capital and Finnovate Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pono Capital position performs unexpectedly, Finnovate 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 Finnovate Acquisition will offset losses from the drop in Finnovate Acquisition's long position.The idea behind Pono Capital Two and Finnovate 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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