Correlation Between FACT II and Valuence Merger

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

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

Diversification Opportunities for FACT II and Valuence Merger

-0.06

Correlation Coefficient

FACT II  Valuence Merger

Good diversification

The 3 months correlation between FACT and Valuence is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding FACT II Acquisition and Valuence Merger Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valuence Merger Corp and FACT II 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 FACT II Acquisition are associated (or correlated) with Valuence Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valuence Merger Corp has no effect on the direction of FACT II i.e., FACT II and Valuence Merger go up and down completely randomly.

Pair Corralation between FACT II and Valuence Merger

Given the investment horizon of 90 days FACT II Acquisition is expected to generate 145.79 times more return on investment than Valuence Merger. However, FACT II is 145.79 times more volatile than Valuence Merger Corp. It trades about 0.01 of its potential returns per unit of risk. Valuence Merger Corp is currently generating about 0.19 per unit of risk. If you would invest  991.00  in FACT II Acquisition on October 8, 2024 and sell it today you would lose (33.00) from holding FACT II Acquisition or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.63%
Values	Daily Returns

FACT II Acquisition  vs.  Valuence Merger Corp

FACT II Acquisition

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FACT II Acquisition are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, FACT II may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Valuence Merger Corp

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valuence Merger Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Valuence Merger is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FACT II and Valuence Merger

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

The idea behind FACT II Acquisition and Valuence Merger 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.