Correlation Between Rose Hill and Semper Paratus
Can any of the company-specific risk be diversified away by investing in both Rose Hill and Semper Paratus 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 Rose Hill and Semper Paratus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rose Hill Acquisition and Semper Paratus Acquisition, you can compare the effects of market volatilities on Rose Hill and Semper Paratus 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 Rose Hill with a short position of Semper Paratus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rose Hill and Semper Paratus.
Diversification Opportunities for Rose Hill and Semper Paratus
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Rose and Semper is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Rose Hill Acquisition and Semper Paratus Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semper Paratus Acqui and Rose Hill 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 Rose Hill Acquisition are associated (or correlated) with Semper Paratus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semper Paratus Acqui has no effect on the direction of Rose Hill i.e., Rose Hill and Semper Paratus go up and down completely randomly.
Pair Corralation between Rose Hill and Semper Paratus
Assuming the 90 days horizon Rose Hill is expected to generate 1.9 times less return on investment than Semper Paratus. But when comparing it to its historical volatility, Rose Hill Acquisition is 1.34 times less risky than Semper Paratus. It trades about 0.1 of its potential returns per unit of risk. Semper Paratus Acquisition is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 0.89 in Semper Paratus Acquisition on August 30, 2024 and sell it today you would earn a total of 3.61 from holding Semper Paratus Acquisition or generate 405.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.2% |
| Values | Daily Returns |
Rose Hill Acquisition vs. Semper Paratus Acquisition
Performance |
| Timeline |
| Rose Hill Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Semper Paratus Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Rose Hill and Semper Paratus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rose Hill and Semper Paratus
The main advantage of trading using opposite Rose Hill and Semper Paratus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rose Hill position performs unexpectedly, Semper Paratus 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 Semper Paratus will offset losses from the drop in Semper Paratus' long position.The idea behind Rose Hill Acquisition and Semper Paratus Acquisition 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 Stocks Directory module to find actively traded stocks across global markets.
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