Correlation Between Scilex Holding and Aldel Financial

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

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

Diversification Opportunities for Scilex Holding and Aldel Financial

0.16

Correlation Coefficient

Scilex Holding  Aldel Financial

Average diversification

The 3 months correlation between Scilex and Aldel is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding and Aldel Financial II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldel Financial II and Scilex Holding 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 Scilex Holding are associated (or correlated) with Aldel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldel Financial II has no effect on the direction of Scilex Holding i.e., Scilex Holding and Aldel Financial go up and down completely randomly.

Pair Corralation between Scilex Holding and Aldel Financial

Assuming the 90 days horizon Scilex Holding is expected to generate 182.4 times more return on investment than Aldel Financial. However, Scilex Holding is 182.4 times more volatile than Aldel Financial II. It trades about 0.0 of its potential returns per unit of risk. Aldel Financial II is currently generating about 0.15 per unit of risk. If you would invest  30.00  in Scilex Holding on October 10, 2024 and sell it today you would lose (10.00) from holding Scilex Holding or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

Scilex Holding  vs.  Aldel Financial II

Scilex Holding

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scilex Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Scilex Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Aldel Financial II

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Scilex Holding and Aldel Financial

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

The idea behind Scilex Holding and Aldel Financial II 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.