Correlation Between Kodiak Sciences and Eureka Acquisition

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

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

Diversification Opportunities for Kodiak Sciences and Eureka Acquisition

0.12

Correlation Coefficient

Kodiak Sciences  Eureka Acquisition

Average diversification

The 3 months correlation between Kodiak and Eureka is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kodiak Sciences and Eureka Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eureka Acquisition Corp and Kodiak Sciences 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 Kodiak Sciences are associated (or correlated) with Eureka Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eureka Acquisition Corp has no effect on the direction of Kodiak Sciences i.e., Kodiak Sciences and Eureka Acquisition go up and down completely randomly.

Pair Corralation between Kodiak Sciences and Eureka Acquisition

Considering the 90-day investment horizon Kodiak Sciences is expected to generate 10.28 times less return on investment than Eureka Acquisition. But when comparing it to its historical volatility, Kodiak Sciences is 31.71 times less risky than Eureka Acquisition. It trades about 0.41 of its potential returns per unit of risk. Eureka Acquisition Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Eureka Acquisition Corp on September 3, 2024 and sell it today you would earn a total of  1,012  from holding Eureka Acquisition Corp or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Kodiak Sciences  vs.  Eureka Acquisition Corp

Kodiak Sciences

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Sciences are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Kodiak Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

Eureka Acquisition Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Acquisition Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Eureka Acquisition disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kodiak Sciences and Eureka Acquisition

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

The idea behind Kodiak Sciences and Eureka 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.