Correlation Between Institute and Coastal Capital

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

By analyzing existing cross correlation between Institute of Biomedical and Coastal Capital Acq, you can compare the effects of market volatilities on Institute and Coastal Capital 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 Institute with a short position of Coastal Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Institute and Coastal Capital.

Diversification Opportunities for Institute and Coastal Capital

-0.13

Correlation Coefficient

Institute  Coastal Capital

Good diversification

The 3 months correlation between Institute and Coastal is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Institute of Biomedical and Coastal Capital Acq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Capital Acq and Institute 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 Institute of Biomedical are associated (or correlated) with Coastal Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Capital Acq has no effect on the direction of Institute i.e., Institute and Coastal Capital go up and down completely randomly.

Pair Corralation between Institute and Coastal Capital

Given the investment horizon of 90 days Institute is expected to generate 3.53 times less return on investment than Coastal Capital. But when comparing it to its historical volatility, Institute of Biomedical is 1.77 times less risky than Coastal Capital. It trades about 0.08 of its potential returns per unit of risk. Coastal Capital Acq is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.07  in Coastal Capital Acq on December 21, 2024 and sell it today you would earn a total of  0.08  from holding Coastal Capital Acq or generate 114.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Institute of Biomedical  vs.  Coastal Capital Acq

Institute of Biomedical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Institute of Biomedical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Institute unveiled solid returns over the last few months and may actually be approaching a breakup point.

Coastal Capital Acq

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Capital Acq are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Coastal Capital revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Institute and Coastal Capital

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

The idea behind Institute of Biomedical and Coastal Capital Acq 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.