Correlation Between Western Acquisition and APx Acquisition
Can any of the company-specific risk be diversified away by investing in both Western Acquisition and APx 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 Western Acquisition and APx Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Acquisition Ventures and APx Acquisition Corp, you can compare the effects of market volatilities on Western Acquisition and APx 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 Western Acquisition with a short position of APx Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Acquisition and APx Acquisition.
Diversification Opportunities for Western Acquisition and APx Acquisition
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and APx is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and APx Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APx Acquisition Corp and Western Acquisition 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 Western Acquisition Ventures are associated (or correlated) with APx Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APx Acquisition Corp has no effect on the direction of Western Acquisition i.e., Western Acquisition and APx Acquisition go up and down completely randomly.
Pair Corralation between Western Acquisition and APx Acquisition
Given the investment horizon of 90 days Western Acquisition Ventures is expected to under-perform the APx Acquisition. In addition to that, Western Acquisition is 2.72 times more volatile than APx Acquisition Corp. It trades about -0.03 of its total potential returns per unit of risk. APx Acquisition Corp is currently generating about 0.0 per unit of volatility. If you would invest 1,157 in APx Acquisition Corp on August 29, 2024 and sell it today you would lose (2.00) from holding APx Acquisition Corp or give up 0.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 91.27% |
| Values | Daily Returns |
Western Acquisition Ventures vs. APx Acquisition Corp
Performance |
| Timeline |
| Western Acquisition |
| APx Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Western Acquisition and APx Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Acquisition and APx Acquisition
The main advantage of trading using opposite Western Acquisition and APx Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Acquisition position performs unexpectedly, APx 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 APx Acquisition will offset losses from the drop in APx Acquisition's long position.The idea behind Western Acquisition Ventures and APx 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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