Correlation Between DMY Squared and Cartica Acquisition

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

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

Diversification Opportunities for DMY Squared and Cartica Acquisition

0.64

Correlation Coefficient

DMY Squared  Cartica Acquisition

Poor diversification

The 3 months correlation between DMY and Cartica is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding dMY Squared Technology and Cartica Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cartica Acquisition Corp and DMY Squared 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 dMY Squared Technology are associated (or correlated) with Cartica Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cartica Acquisition Corp has no effect on the direction of DMY Squared i.e., DMY Squared and Cartica Acquisition go up and down completely randomly.

Pair Corralation between DMY Squared and Cartica Acquisition

Given the investment horizon of 90 days dMY Squared Technology is expected to generate 0.04 times more return on investment than Cartica Acquisition. However, dMY Squared Technology is 22.56 times less risky than Cartica Acquisition. It trades about 0.01 of its potential returns per unit of risk. Cartica Acquisition Corp is currently generating about -0.05 per unit of risk. If you would invest  1,065  in dMY Squared Technology on October 5, 2024 and sell it today you would earn a total of  1.00  from holding dMY Squared Technology or generate 0.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.0%
Values	Daily Returns

dMY Squared Technology  vs.  Cartica Acquisition Corp

dMY Squared Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days dMY Squared Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, DMY Squared is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cartica Acquisition Corp

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Cartica Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal technical and fundamental indicators, Cartica Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DMY Squared and Cartica Acquisition

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

The idea behind dMY Squared Technology and Cartica Acquisition Corp 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.