Correlation Between Cactus Acquisition and Compass Digital

Can any of the company-specific risk be diversified away by investing in both Cactus Acquisition and Compass Digital 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 Compass Digital 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 Compass Digital Acquisition, you can compare the effects of market volatilities on Cactus Acquisition and Compass Digital 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 Compass Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cactus Acquisition and Compass Digital.

Diversification Opportunities for Cactus Acquisition and Compass Digital

0.05

Correlation Coefficient

Cactus Acquisition  Compass Digital

Significant diversification

The 3 months correlation between Cactus and Compass is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Acquisition Corp and Compass Digital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Digital Acqu 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 Compass Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Digital Acqu has no effect on the direction of Cactus Acquisition i.e., Cactus Acquisition and Compass Digital go up and down completely randomly.

Pair Corralation between Cactus Acquisition and Compass Digital

Assuming the 90 days horizon Cactus Acquisition Corp is expected to generate 0.97 times more return on investment than Compass Digital. However, Cactus Acquisition Corp is 1.03 times less risky than Compass Digital. It trades about 0.03 of its potential returns per unit of risk. Compass Digital Acquisition is currently generating about 0.02 per unit of risk. If you would invest  1,031  in Cactus Acquisition Corp on October 11, 2024 and sell it today you would earn a total of  134.00  from holding Cactus Acquisition Corp or generate 13.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.59%
Values	Daily Returns

Cactus Acquisition Corp  vs.  Compass Digital Acquisition

Cactus Acquisition Corp

Risk-Adjusted Performance

0 of 100

Solid

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Compass Digital Acqu

Risk-Adjusted Performance

0 of 100

Strong

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

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

The idea behind Cactus Acquisition Corp and Compass Digital 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..