Correlation Between Thayer Ventures and Cepton

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

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

Diversification Opportunities for Thayer Ventures and Cepton

-0.61

Correlation Coefficient

Thayer Ventures  Cepton

Excellent diversification

The 3 months correlation between Thayer and Cepton is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Thayer Ventures Acquisition and Cepton Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cepton Inc and Thayer Ventures 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 Thayer Ventures Acquisition are associated (or correlated) with Cepton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cepton Inc has no effect on the direction of Thayer Ventures i.e., Thayer Ventures and Cepton go up and down completely randomly.

Pair Corralation between Thayer Ventures and Cepton

Assuming the 90 days horizon Thayer Ventures Acquisition is expected to generate 53.59 times more return on investment than Cepton. However, Thayer Ventures is 53.59 times more volatile than Cepton Inc. It trades about 0.08 of its potential returns per unit of risk. Cepton Inc is currently generating about 0.15 per unit of risk. If you would invest  1.30  in Thayer Ventures Acquisition on September 14, 2024 and sell it today you would lose (0.30) from holding Thayer Ventures Acquisition or give up 23.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Thayer Ventures Acquisition  vs.  Cepton Inc

Thayer Ventures Acqu

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thayer Ventures Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Thayer Ventures showed solid returns over the last few months and may actually be approaching a breakup point.

Cepton Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cepton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Thayer Ventures and Cepton

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

The idea behind Thayer Ventures Acquisition and Cepton Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.