Correlation Between Blue World and A SPAC

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

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

Diversification Opportunities for Blue World and A SPAC

0.21

Correlation Coefficient

Blue World  A SPAC

Modest diversification

The 3 months correlation between Blue and ASCAU is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Blue World Acquisition and A SPAC I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A SPAC I and Blue 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 Blue World Acquisition are associated (or correlated) with A SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A SPAC I has no effect on the direction of Blue World i.e., Blue World and A SPAC go up and down completely randomly.

Pair Corralation between Blue World and A SPAC

Assuming the 90 days horizon Blue World Acquisition is expected to under-perform the A SPAC. In addition to that, Blue World is 1.74 times more volatile than A SPAC I. It trades about -0.07 of its total potential returns per unit of risk. A SPAC I is currently generating about 0.03 per unit of volatility. If you would invest  1,023  in A SPAC I on September 18, 2024 and sell it today you would earn a total of  56.00  from holding A SPAC I or generate 5.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	37.27%
Values	Daily Returns

Blue World Acquisition  vs.  A SPAC I

Blue World Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue World Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Blue World is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

A SPAC I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A SPAC I has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, A SPAC 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 Blue World and A SPAC

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

The idea behind Blue World Acquisition and A SPAC I 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.