Correlation Between Embrace Change and DP Cap

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

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

Diversification Opportunities for Embrace Change and DP Cap

0.67

Correlation Coefficient

Embrace Change  DP Cap

Poor diversification

The 3 months correlation between Embrace and DPCS is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and DP Cap Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DP Cap Acquisition and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with DP Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DP Cap Acquisition has no effect on the direction of Embrace Change i.e., Embrace Change and DP Cap go up and down completely randomly.

Pair Corralation between Embrace Change and DP Cap

Given the investment horizon of 90 days Embrace Change is expected to generate 11.54 times less return on investment than DP Cap. But when comparing it to its historical volatility, Embrace Change Acquisition is 8.69 times less risky than DP Cap. It trades about 0.08 of its potential returns per unit of risk. DP Cap Acquisition is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,138  in DP Cap Acquisition on August 31, 2024 and sell it today you would earn a total of  122.00  from holding DP Cap Acquisition or generate 10.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Embrace Change Acquisition  vs.  DP Cap Acquisition

Embrace Change Acqui

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Embrace Change is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

DP Cap Acquisition

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days DP Cap Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak fundamental indicators, DP Cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Embrace Change and DP Cap

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

The idea behind Embrace Change Acquisition and DP Cap 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.