Correlation Between SpringBig Holdings and Cerence

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

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

Diversification Opportunities for SpringBig Holdings and Cerence

-0.11

Correlation Coefficient

SpringBig Holdings  Cerence

Good diversification

The 3 months correlation between SpringBig and Cerence is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SpringBig Holdings and Cerence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerence and SpringBig Holdings 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 SpringBig Holdings are associated (or correlated) with Cerence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerence has no effect on the direction of SpringBig Holdings i.e., SpringBig Holdings and Cerence go up and down completely randomly.

Pair Corralation between SpringBig Holdings and Cerence

Assuming the 90 days horizon SpringBig Holdings is expected to generate 2.18 times more return on investment than Cerence. However, SpringBig Holdings is 2.18 times more volatile than Cerence. It trades about 0.05 of its potential returns per unit of risk. Cerence is currently generating about 0.03 per unit of risk. If you would invest  3.52  in SpringBig Holdings on October 9, 2024 and sell it today you would lose (2.32) from holding SpringBig Holdings or give up 65.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.56%
Values	Daily Returns

SpringBig Holdings  vs.  Cerence

SpringBig Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cerence

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cerence are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Cerence exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SpringBig Holdings and Cerence

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

The idea behind SpringBig Holdings and Cerence 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.