Correlation Between Andretti Acquisition and KAT Exploration
Can any of the company-specific risk be diversified away by investing in both Andretti Acquisition and KAT Exploration 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 Andretti Acquisition and KAT Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Andretti Acquisition Corp and KAT Exploration, you can compare the effects of market volatilities on Andretti Acquisition and KAT Exploration 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 Andretti Acquisition with a short position of KAT Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Andretti Acquisition and KAT Exploration.
Diversification Opportunities for Andretti Acquisition and KAT Exploration
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Andretti and KAT is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Andretti Acquisition Corp and KAT Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAT Exploration and Andretti 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 Andretti Acquisition Corp are associated (or correlated) with KAT Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAT Exploration has no effect on the direction of Andretti Acquisition i.e., Andretti Acquisition and KAT Exploration go up and down completely randomly.
Pair Corralation between Andretti Acquisition and KAT Exploration
Given the investment horizon of 90 days Andretti Acquisition is expected to generate 101.04 times less return on investment than KAT Exploration. But when comparing it to its historical volatility, Andretti Acquisition Corp is 609.38 times less risky than KAT Exploration. It trades about 0.58 of its potential returns per unit of risk. KAT Exploration is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.07 in KAT Exploration on September 12, 2024 and sell it today you would lose (0.04) from holding KAT Exploration or give up 57.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 0.85% |
| Values | Daily Returns |
Andretti Acquisition Corp vs. KAT Exploration
Performance |
| Timeline |
| Andretti Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| KAT Exploration |
Andretti Acquisition and KAT Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Andretti Acquisition and KAT Exploration
The main advantage of trading using opposite Andretti Acquisition and KAT Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Andretti Acquisition position performs unexpectedly, KAT Exploration 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 KAT Exploration will offset losses from the drop in KAT Exploration's long position.The idea behind Andretti Acquisition Corp and KAT Exploration 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.| KAT Exploration vs. Advantage Solutions | KAT Exploration vs. Atlas Corp | KAT Exploration vs. PureCycle Technologies | KAT Exploration vs. WM Technology |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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