Correlation Between Forum Merger and BYTE Acquisition

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

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

Diversification Opportunities for Forum Merger and BYTE Acquisition

-0.06

Correlation Coefficient

Forum Merger  BYTE Acquisition

Good diversification

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

Pair Corralation between Forum Merger and BYTE Acquisition

Assuming the 90 days horizon Forum Merger is expected to generate 3.41 times less return on investment than BYTE Acquisition. But when comparing it to its historical volatility, Forum Merger IV is 2.02 times less risky than BYTE Acquisition. It trades about 0.02 of its potential returns per unit of risk. BYTE Acquisition Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,007  in BYTE Acquisition Corp on September 21, 2024 and sell it today you would earn a total of  69.00  from holding BYTE Acquisition Corp or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.28%
Values	Daily Returns

Forum Merger IV  vs.  BYTE Acquisition Corp

Forum Merger IV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forum Merger IV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Forum Merger is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BYTE Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Forum Merger IV and BYTE 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 Global Correlations module to find global opportunities by holding instruments from different markets.