Correlation Between Sound Point and Redwoods Acquisition

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

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

Diversification Opportunities for Sound Point and Redwoods Acquisition

-0.37

Correlation Coefficient

Sound Point  Redwoods Acquisition

Very good diversification

The 3 months correlation between Sound and Redwoods is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sound Point Acquisition and Redwoods Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwoods Acquisition Corp and Sound Point 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 Sound Point Acquisition are associated (or correlated) with Redwoods Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwoods Acquisition Corp has no effect on the direction of Sound Point i.e., Sound Point and Redwoods Acquisition go up and down completely randomly.

Pair Corralation between Sound Point and Redwoods Acquisition

Assuming the 90 days horizon Sound Point Acquisition is not expected to generate positive returns. However, Sound Point Acquisition is 118.53 times less risky than Redwoods Acquisition. It waists most of its returns potential to compensate for thr risk taken. Redwoods Acquisition is generating about -0.07 per unit of risk. If you would invest  1,066  in Sound Point Acquisition on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Sound Point Acquisition or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.13%
Values	Daily Returns

Sound Point Acquisition  vs.  Redwoods Acquisition Corp

Sound Point Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sound Point Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Sound Point is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Redwoods Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redwoods Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Redwoods Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sound Point and Redwoods Acquisition

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

The idea behind Sound Point Acquisition and Redwoods 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.