Correlation Between Coastal Capital and USCorp

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

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

Diversification Opportunities for Coastal Capital and USCorp

0.0

Correlation Coefficient

Coastal Capital  USCorp

Pay attention - limited upside

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

Pair Corralation between Coastal Capital and USCorp

Given the investment horizon of 90 days Coastal Capital Acq is expected to generate 2.63 times more return on investment than USCorp. However, Coastal Capital is 2.63 times more volatile than USCorp. It trades about 0.1 of its potential returns per unit of risk. USCorp is currently generating about -0.05 per unit of risk. If you would invest  0.14  in Coastal Capital Acq on September 6, 2024 and sell it today you would earn a total of  0.00  from holding Coastal Capital Acq or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.75%
Values	Daily Returns

Coastal Capital Acq  vs.  USCorp

Coastal Capital Acq

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Capital Acq are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Coastal Capital revealed solid returns over the last few months and may actually be approaching a breakup point.

USCorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Coastal Capital and USCorp

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

The idea behind Coastal Capital Acq and USCorp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.