Correlation Between Pono Capital and HCM Acquisition
Can any of the company-specific risk be diversified away by investing in both Pono Capital 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 Pono Capital and HCM 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 HCM Acquisition Corp, you can compare the effects of market volatilities on Pono Capital 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 Pono Capital with a short position of HCM Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pono Capital and HCM Acquisition.
Diversification Opportunities for Pono Capital and HCM Acquisition
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Pono and HCM is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Pono Capital Two 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 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 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 Pono Capital i.e., Pono Capital and HCM Acquisition go up and down completely randomly.
Pair Corralation between Pono Capital and HCM Acquisition
Assuming the 90 days horizon Pono Capital is expected to generate 104.14 times less return on investment than HCM Acquisition. But when comparing it to its historical volatility, Pono Capital Two is 16.11 times less risky than HCM Acquisition. It trades about 0.03 of its potential returns per unit of risk. HCM Acquisition Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5.22 in HCM Acquisition Corp on August 26, 2024 and sell it today you would lose (3.16) from holding HCM Acquisition Corp or give up 60.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 18.93% |
| Values | Daily Returns |
Pono Capital Two vs. HCM Acquisition Corp
Performance |
| Timeline |
| Pono Capital Two |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| HCM Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Pono Capital and HCM Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pono Capital and HCM Acquisition
The main advantage of trading using opposite Pono Capital and HCM Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pono Capital 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 Pono Capital Two 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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