Correlation Between Alpha One and HCM Acquisition

Can any of the company-specific risk be diversified away by investing in both Alpha One and HCM 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 Alpha One and HCM Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Alpha One and HCM Acquisition

0.0

Correlation Coefficient

Alpha One  HCM Acquisition

Pay attention - limited upside

The 3 months correlation between Alpha and HCM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alpha One and HCM Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Acquisition Corp and Alpha One 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 Alpha One are associated (or correlated) with HCM Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Acquisition Corp has no effect on the direction of Alpha One i.e., Alpha One and HCM Acquisition go up and down completely randomly.

Pair Corralation between Alpha One and HCM Acquisition

Given the investment horizon of 90 days Alpha One is expected to generate 82.08 times less return on investment than HCM Acquisition. But when comparing it to its historical volatility, Alpha One is 10.13 times less risky than HCM Acquisition. It trades about 0.03 of its potential returns per unit of risk. HCM Acquisition Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  0.97  in HCM Acquisition Corp on September 21, 2024 and sell it today you would earn a total of  1.09  from holding HCM Acquisition Corp or generate 112.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	14.72%
Values	Daily Returns

Alpha One  vs.  HCM Acquisition Corp

Alpha One

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alpha One is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

HCM Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCM Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, HCM Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alpha One and HCM Acquisition

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

The idea behind Alpha One and HCM 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.