Correlation Between Banner Acquisition and Sculptor Acquisition

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

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

Diversification Opportunities for Banner Acquisition and Sculptor Acquisition

0.94

Correlation Coefficient

Banner Acquisition  Sculptor Acquisition

Almost no diversification

The 3 months correlation between Banner and Sculptor is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Banner Acquisition Corp and Sculptor Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sculptor Acquisition Corp and Banner Acquisition 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 Banner Acquisition Corp are associated (or correlated) with Sculptor Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sculptor Acquisition Corp has no effect on the direction of Banner Acquisition i.e., Banner Acquisition and Sculptor Acquisition go up and down completely randomly.

Pair Corralation between Banner Acquisition and Sculptor Acquisition

Given the investment horizon of 90 days Banner Acquisition is expected to generate 1.22 times less return on investment than Sculptor Acquisition. But when comparing it to its historical volatility, Banner Acquisition Corp is 1.2 times less risky than Sculptor Acquisition. It trades about 0.23 of its potential returns per unit of risk. Sculptor Acquisition Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,026  in Sculptor Acquisition Corp on September 19, 2024 and sell it today you would earn a total of  29.00  from holding Sculptor Acquisition Corp or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	90.38%
Values	Daily Returns

Banner Acquisition Corp  vs.  Sculptor Acquisition Corp

Banner Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sculptor Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sculptor Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sculptor Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banner Acquisition and Sculptor Acquisition

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

The idea behind Banner Acquisition Corp and Sculptor 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.