Correlation Between Better World and Prime Impact

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

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

Diversification Opportunities for Better World and Prime Impact

0.89

Correlation Coefficient

Better World  Prime Impact

Very poor diversification

The 3 months correlation between Better and Prime is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Better World Acquisition and Prime Impact Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Impact Acquisition and Better World 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 Better World Acquisition are associated (or correlated) with Prime Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Impact Acquisition has no effect on the direction of Better World i.e., Better World and Prime Impact go up and down completely randomly.

Pair Corralation between Better World and Prime Impact

If you would invest  1,069  in Prime Impact Acquisition on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Prime Impact Acquisition or generate 0.0% return on investment over 90 days.

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

Better World Acquisition  vs.  Prime Impact Acquisition

Better World Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better World Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Better World is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Prime Impact Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Impact Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Prime Impact is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Better World and Prime Impact

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

The idea behind Better World Acquisition and Prime Impact Acquisition 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.