Correlation Between Broad Capital and Sound Point

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

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

Diversification Opportunities for Broad Capital and Sound Point

-0.26

Correlation Coefficient

Broad Capital  Sound Point

Very good diversification

The 3 months correlation between Broad and Sound is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Broad Capital Acquisition and Sound Point Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Point Acquisition and Broad Capital 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 Broad Capital Acquisition are associated (or correlated) with Sound Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Point Acquisition has no effect on the direction of Broad Capital i.e., Broad Capital and Sound Point go up and down completely randomly.

Pair Corralation between Broad Capital and Sound Point

Assuming the 90 days horizon Broad Capital is expected to generate 1.21 times less return on investment than Sound Point. But when comparing it to its historical volatility, Broad Capital Acquisition is 1.21 times less risky than Sound Point. It trades about 0.03 of its potential returns per unit of risk. Sound Point Acquisition is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,055  in Sound Point Acquisition on October 5, 2024 and sell it today you would earn a total of  11.00  from holding Sound Point Acquisition or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	13.63%
Values	Daily Returns

Broad Capital Acquisition  vs.  Sound Point Acquisition

Broad Capital Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sound Point Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Broad Capital and Sound Point

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

The idea behind Broad Capital Acquisition and Sound Point 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.