Correlation Between Latamgrowth SPAC and Diguang Intl

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

By analyzing existing cross correlation between Latamgrowth SPAC Unit and Diguang Intl Dev, you can compare the effects of market volatilities on Latamgrowth SPAC and Diguang Intl 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 Latamgrowth SPAC with a short position of Diguang Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Latamgrowth SPAC and Diguang Intl.

Diversification Opportunities for Latamgrowth SPAC and Diguang Intl

-0.36

Correlation Coefficient

Latamgrowth SPAC  Diguang Intl

Very good diversification

The 3 months correlation between Latamgrowth and Diguang is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Latamgrowth SPAC Unit and Diguang Intl Dev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diguang Intl Dev and Latamgrowth SPAC 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 Latamgrowth SPAC Unit are associated (or correlated) with Diguang Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diguang Intl Dev has no effect on the direction of Latamgrowth SPAC i.e., Latamgrowth SPAC and Diguang Intl go up and down completely randomly.

Pair Corralation between Latamgrowth SPAC and Diguang Intl

Assuming the 90 days horizon Latamgrowth SPAC is expected to generate 135.04 times less return on investment than Diguang Intl. But when comparing it to its historical volatility, Latamgrowth SPAC Unit is 32.6 times less risky than Diguang Intl. It trades about 0.02 of its potential returns per unit of risk. Diguang Intl Dev is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.11  in Diguang Intl Dev on October 26, 2024 and sell it today you would lose (0.02) from holding Diguang Intl Dev or give up 18.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.19%
Values	Daily Returns

Latamgrowth SPAC Unit  vs.  Diguang Intl Dev

Latamgrowth SPAC Unit

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Latamgrowth SPAC Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady technical and fundamental indicators, Latamgrowth SPAC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Diguang Intl Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diguang Intl Dev has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Latamgrowth SPAC and Diguang Intl

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

The idea behind Latamgrowth SPAC Unit and Diguang Intl Dev 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.