Correlation Between Jaws Hurricane and Talon 1

Can any of the company-specific risk be diversified away by investing in both Jaws Hurricane and Talon 1 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 Jaws Hurricane and Talon 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jaws Hurricane Acquisition and Talon 1 Acquisition, you can compare the effects of market volatilities on Jaws Hurricane and Talon 1 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 Jaws Hurricane with a short position of Talon 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jaws Hurricane and Talon 1.

Diversification Opportunities for Jaws Hurricane and Talon 1

0.56

Correlation Coefficient

Jaws Hurricane  Talon 1

Very weak diversification

The 3 months correlation between Jaws and Talon is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Jaws Hurricane Acquisition and Talon 1 Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon 1 Acquisition and Jaws Hurricane 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 Jaws Hurricane Acquisition are associated (or correlated) with Talon 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon 1 Acquisition has no effect on the direction of Jaws Hurricane i.e., Jaws Hurricane and Talon 1 go up and down completely randomly.

Pair Corralation between Jaws Hurricane and Talon 1

Assuming the 90 days horizon Jaws Hurricane is expected to generate 3.6 times less return on investment than Talon 1. But when comparing it to its historical volatility, Jaws Hurricane Acquisition is 1.13 times less risky than Talon 1. It trades about 0.03 of its potential returns per unit of risk. Talon 1 Acquisition is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.02  in Talon 1 Acquisition on September 14, 2024 and sell it today you would lose (0.81) from holding Talon 1 Acquisition or give up 79.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.43%
Values	Daily Returns

Jaws Hurricane Acquisition  vs.  Talon 1 Acquisition

Jaws Hurricane Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

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

Talon 1 Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon 1 Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Talon 1 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 Jaws Hurricane and Talon 1

The main advantage of trading using opposite Jaws Hurricane and Talon 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jaws Hurricane position performs unexpectedly, Talon 1 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 Talon 1 will offset losses from the drop in Talon 1's long position.

The idea behind Jaws Hurricane Acquisition and Talon 1 Acquisition 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.