Correlation Between Cactus Acquisition and Pono Capital

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

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

Diversification Opportunities for Cactus Acquisition and Pono Capital

-0.08

Correlation Coefficient

Cactus Acquisition  Pono Capital

Good diversification

The 3 months correlation between Cactus and Pono is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Acquisition Corp and Pono Capital Two in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pono Capital Two and Cactus 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 Cactus Acquisition Corp are associated (or correlated) with Pono Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pono Capital Two has no effect on the direction of Cactus Acquisition i.e., Cactus Acquisition and Pono Capital go up and down completely randomly.

Pair Corralation between Cactus Acquisition and Pono Capital

If you would invest  1,146  in Cactus Acquisition Corp on September 17, 2024 and sell it today you would lose (7.00) from holding Cactus Acquisition Corp or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	3.08%
Values	Daily Returns

Cactus Acquisition Corp  vs.  Pono Capital Two

Cactus Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pono Capital Two

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pono Capital Two has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pono Capital 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 Cactus Acquisition and Pono Capital

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

The idea behind Cactus Acquisition Corp and Pono Capital Two 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.