Correlation Between Perception Capital and Fusion Acquisition

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

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

Diversification Opportunities for Perception Capital and Fusion Acquisition

0.63

Correlation Coefficient

Perception Capital  Fusion Acquisition

Poor diversification

The 3 months correlation between Perception and Fusion is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Perception Capital Corp and Fusion Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fusion Acquisition Corp and Perception Capital 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 Perception Capital Corp are associated (or correlated) with Fusion Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fusion Acquisition Corp has no effect on the direction of Perception Capital i.e., Perception Capital and Fusion Acquisition go up and down completely randomly.

Pair Corralation between Perception Capital and Fusion Acquisition

Assuming the 90 days horizon Perception Capital Corp is expected to generate 428.75 times more return on investment than Fusion Acquisition. However, Perception Capital is 428.75 times more volatile than Fusion Acquisition Corp. It trades about 0.14 of its potential returns per unit of risk. Fusion Acquisition Corp is currently generating about 0.18 per unit of risk. If you would invest  1.98  in Perception Capital Corp on September 16, 2024 and sell it today you would earn a total of  9.02  from holding Perception Capital Corp or generate 455.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	40.28%
Values	Daily Returns

Perception Capital Corp  vs.  Fusion Acquisition Corp

Perception Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perception Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Perception Capital is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fusion Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fusion Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fusion Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Perception Capital and Fusion Acquisition

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

The idea behind Perception Capital Corp and Fusion 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.