Correlation Between Adit EdTech and Energem Corp

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

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

Diversification Opportunities for Adit EdTech and Energem Corp

0.4

Correlation Coefficient

Adit EdTech  Energem Corp

Very weak diversification

The 3 months correlation between Adit and Energem is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Adit EdTech Acquisition and Energem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energem Corp and Adit EdTech 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 Adit EdTech Acquisition are associated (or correlated) with Energem Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energem Corp has no effect on the direction of Adit EdTech i.e., Adit EdTech and Energem Corp go up and down completely randomly.

Pair Corralation between Adit EdTech and Energem Corp

Given the investment horizon of 90 days Adit EdTech Acquisition is expected to under-perform the Energem Corp. But the stock apears to be less risky and, when comparing its historical volatility, Adit EdTech Acquisition is 1.92 times less risky than Energem Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Energem Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,032  in Energem Corp on September 24, 2024 and sell it today you would lose (1,032) from holding Energem Corp or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.76%
Values	Daily Returns

Adit EdTech Acquisition  vs.  Energem Corp

Adit EdTech Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adit EdTech Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Adit EdTech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Energem Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Adit EdTech and Energem Corp

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

The idea behind Adit EdTech Acquisition and Energem 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.