Correlation Between Cepton and Inspirato

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

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

Diversification Opportunities for Cepton and Inspirato

-0.59

Correlation Coefficient

Cepton  Inspirato

Excellent diversification

The 3 months correlation between Cepton and Inspirato is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cepton Inc and Inspirato in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspirato and Cepton 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 Cepton Inc are associated (or correlated) with Inspirato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspirato has no effect on the direction of Cepton i.e., Cepton and Inspirato go up and down completely randomly.

Pair Corralation between Cepton and Inspirato

Given the investment horizon of 90 days Cepton Inc is expected to generate 0.12 times more return on investment than Inspirato. However, Cepton Inc is 8.22 times less risky than Inspirato. It trades about 0.14 of its potential returns per unit of risk. Inspirato is currently generating about -0.06 per unit of risk. If you would invest  306.00  in Cepton Inc on September 15, 2024 and sell it today you would earn a total of  13.00  from holding Cepton Inc or generate 4.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cepton Inc  vs.  Inspirato

Cepton Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cepton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Inspirato

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspirato has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cepton and Inspirato

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

The idea behind Cepton Inc and Inspirato 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.