Correlation Between Battery Future and Andretti Acquisition

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

Diversification Opportunities for Battery Future and Andretti Acquisition

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Battery and Andretti is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Battery Future Acquisition and Andretti Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andretti Acquisition Corp and Battery Future 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 Battery Future Acquisition are associated (or correlated) with Andretti Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andretti Acquisition Corp has no effect on the direction of Battery Future i.e., Battery Future and Andretti Acquisition go up and down completely randomly.

Pair Corralation between Battery Future and Andretti Acquisition

If you would invest  1,103  in Battery Future Acquisition on September 18, 2024 and sell it today you would earn a total of  25.00  from holding Battery Future Acquisition or generate 2.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy1.59%
ValuesDaily Returns

Battery Future Acquisition  vs.  Andretti Acquisition Corp

 Performance 
       Timeline  
Battery Future Acqui 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Battery Future Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Battery Future is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Andretti Acquisition Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Andretti Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Andretti Acquisition is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Battery Future and Andretti Acquisition Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Battery Future and Andretti Acquisition

The main advantage of trading using opposite Battery Future and Andretti Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Battery Future position performs unexpectedly, Andretti 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 Andretti Acquisition will offset losses from the drop in Andretti Acquisition's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Battery Future as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Battery Future's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Battery Future's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Battery Future Acquisition.
The idea behind Battery Future Acquisition and Andretti 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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