Correlation Between DT Cloud and IB Acquisition

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

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

Diversification Opportunities for DT Cloud and IB Acquisition

0.05

Correlation Coefficient

DT Cloud  IB Acquisition

Significant diversification

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

Pair Corralation between DT Cloud and IB Acquisition

Given the investment horizon of 90 days DT Cloud is expected to generate 32.03 times less return on investment than IB Acquisition. But when comparing it to its historical volatility, DT Cloud Acquisition is 97.85 times less risky than IB Acquisition. It trades about 0.23 of its potential returns per unit of risk. IB Acquisition Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6.49  in IB Acquisition Corp on December 26, 2024 and sell it today you would lose (0.47) from holding IB Acquisition Corp or give up 7.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.97%
Values	Daily Returns

DT Cloud Acquisition  vs.  IB Acquisition Corp

DT Cloud Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DT Cloud Acquisition are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, DT Cloud is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

IB Acquisition Corp

Risk-Adjusted Performance

Modest

Over the last 90 days IB Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively abnormal fundamental indicators, IB Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DT Cloud and IB Acquisition

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

The idea behind DT Cloud Acquisition and IB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.