Correlation Between TuanChe ADR and Software Acquisition

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Can any of the company-specific risk be diversified away by investing in both TuanChe ADR and Software 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 TuanChe ADR and Software Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TuanChe ADR and Software Acquisition Group, you can compare the effects of market volatilities on TuanChe ADR and Software 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 TuanChe ADR with a short position of Software Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of TuanChe ADR and Software Acquisition.

Diversification Opportunities for TuanChe ADR and Software Acquisition

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between TuanChe and Software is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding TuanChe ADR and Software Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Acquisition and TuanChe ADR 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 TuanChe ADR are associated (or correlated) with Software Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Acquisition has no effect on the direction of TuanChe ADR i.e., TuanChe ADR and Software Acquisition go up and down completely randomly.

Pair Corralation between TuanChe ADR and Software Acquisition

Allowing for the 90-day total investment horizon TuanChe ADR is expected to under-perform the Software Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, TuanChe ADR is 16.63 times less risky than Software Acquisition. The stock trades about -0.05 of its potential returns per unit of risk. The Software Acquisition Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Software Acquisition Group on September 14, 2024 and sell it today you would earn a total of  1.26  from holding Software Acquisition Group or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy41.77%
ValuesDaily Returns

TuanChe ADR  vs.  Software Acquisition Group

 Performance 
       Timeline  
TuanChe ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TuanChe ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Software Acquisition 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Software Acquisition Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Software Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

TuanChe ADR and Software Acquisition Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TuanChe ADR and Software Acquisition

The main advantage of trading using opposite TuanChe ADR and Software Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TuanChe ADR position performs unexpectedly, Software 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 Software Acquisition will offset losses from the drop in Software Acquisition's long position.
The idea behind TuanChe ADR and Software Acquisition Group 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.
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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