Correlation Between RPBio and HMCIB SPAC

Can any of the company-specific risk be diversified away by investing in both RPBio and HMCIB SPAC 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 RPBio and HMCIB SPAC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RPBio Inc and HMCIB SPAC 3, you can compare the effects of market volatilities on RPBio and HMCIB SPAC 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 RPBio with a short position of HMCIB SPAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPBio and HMCIB SPAC.

Diversification Opportunities for RPBio and HMCIB SPAC

0.92

Correlation Coefficient

RPBio  HMCIB SPAC

Almost no diversification

The 3 months correlation between RPBio and HMCIB is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding RPBio Inc and HMCIB SPAC 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMCIB SPAC 3 and RPBio 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 RPBio Inc are associated (or correlated) with HMCIB SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMCIB SPAC 3 has no effect on the direction of RPBio i.e., RPBio and HMCIB SPAC go up and down completely randomly.

Pair Corralation between RPBio and HMCIB SPAC

Assuming the 90 days trading horizon RPBio Inc is expected to under-perform the HMCIB SPAC. But the stock apears to be less risky and, when comparing its historical volatility, RPBio Inc is 1.41 times less risky than HMCIB SPAC. The stock trades about -0.06 of its potential returns per unit of risk. The HMCIB SPAC 3 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  165,500  in HMCIB SPAC 3 on September 16, 2024 and sell it today you would lose (28,100) from holding HMCIB SPAC 3 or give up 16.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

RPBio Inc  vs.  HMCIB SPAC 3

RPBio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RPBio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HMCIB SPAC 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMCIB SPAC 3 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RPBio and HMCIB SPAC

The main advantage of trading using opposite RPBio and HMCIB SPAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPBio position performs unexpectedly, HMCIB SPAC 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 HMCIB SPAC will offset losses from the drop in HMCIB SPAC's long position.

The idea behind RPBio Inc and HMCIB SPAC 3 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.