Correlation Between AlphaTime Acquisition and DUET Acquisition

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

By analyzing existing cross correlation between AlphaTime Acquisition Corp and DUET Acquisition Corp, you can compare the effects of market volatilities on AlphaTime Acquisition and DUET 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 AlphaTime Acquisition with a short position of DUET Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of AlphaTime Acquisition and DUET Acquisition.

Diversification Opportunities for AlphaTime Acquisition and DUET Acquisition

0.6

Correlation Coefficient

AlphaTime Acquisition  DUET Acquisition

Poor diversification

The 3 months correlation between AlphaTime and DUET is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AlphaTime Acquisition Corp and DUET Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUET Acquisition Corp and AlphaTime 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 AlphaTime Acquisition Corp are associated (or correlated) with DUET Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUET Acquisition Corp has no effect on the direction of AlphaTime Acquisition i.e., AlphaTime Acquisition and DUET Acquisition go up and down completely randomly.

Pair Corralation between AlphaTime Acquisition and DUET Acquisition

Given the investment horizon of 90 days AlphaTime Acquisition Corp is expected to generate 0.66 times more return on investment than DUET Acquisition. However, AlphaTime Acquisition Corp is 1.51 times less risky than DUET Acquisition. It trades about 0.22 of its potential returns per unit of risk. DUET Acquisition Corp is currently generating about 0.07 per unit of risk. If you would invest  1,116  in AlphaTime Acquisition Corp on September 3, 2024 and sell it today you would earn a total of  15.00  from holding AlphaTime Acquisition Corp or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

AlphaTime Acquisition Corp  vs.  DUET Acquisition Corp

AlphaTime Acquisition

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AlphaTime Acquisition Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, AlphaTime Acquisition is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DUET Acquisition Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DUET Acquisition Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, DUET Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AlphaTime Acquisition and DUET Acquisition

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

The idea behind AlphaTime Acquisition Corp and DUET 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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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.