Correlation Between HCM Acquisition and Bleuacacia

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

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

Diversification Opportunities for HCM Acquisition and Bleuacacia

-0.19

Correlation Coefficient

HCM Acquisition  Bleuacacia

Good diversification

The 3 months correlation between HCM and Bleuacacia is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding HCM Acquisition Corp and Bleuacacia Ltd Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bleuacacia Warrants and HCM Acquisition 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 HCM Acquisition Corp are associated (or correlated) with Bleuacacia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bleuacacia Warrants has no effect on the direction of HCM Acquisition i.e., HCM Acquisition and Bleuacacia go up and down completely randomly.

Pair Corralation between HCM Acquisition and Bleuacacia

Assuming the 90 days horizon HCM Acquisition is expected to generate 2.55 times less return on investment than Bleuacacia. But when comparing it to its historical volatility, HCM Acquisition Corp is 3.0 times less risky than Bleuacacia. It trades about 0.18 of its potential returns per unit of risk. Bleuacacia Ltd Warrants is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Bleuacacia Ltd Warrants on October 7, 2024 and sell it today you would lose (1.03) from holding Bleuacacia Ltd Warrants or give up 51.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.96%
Values	Daily Returns

HCM Acquisition Corp  vs.  Bleuacacia Ltd Warrants

HCM Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCM Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, HCM Acquisition is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Bleuacacia Warrants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bleuacacia Ltd Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bleuacacia is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with HCM Acquisition and Bleuacacia

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

The idea behind HCM Acquisition Corp and Bleuacacia Ltd Warrants 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.