Correlation Between TransAKT and Embrace Change

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

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

Diversification Opportunities for TransAKT and Embrace Change

0.57

Correlation Coefficient

TransAKT  Embrace Change

Very weak diversification

The 3 months correlation between TransAKT and Embrace is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding TransAKT and Embrace Change Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embrace Change Acqui and TransAKT 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 TransAKT are associated (or correlated) with Embrace Change. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embrace Change Acqui has no effect on the direction of TransAKT i.e., TransAKT and Embrace Change go up and down completely randomly.

Pair Corralation between TransAKT and Embrace Change

Given the investment horizon of 90 days TransAKT is expected to generate 110.5 times more return on investment than Embrace Change. However, TransAKT is 110.5 times more volatile than Embrace Change Acquisition. It trades about 0.15 of its potential returns per unit of risk. Embrace Change Acquisition is currently generating about 0.1 per unit of risk. If you would invest  0.27  in TransAKT on December 30, 2024 and sell it today you would earn a total of  0.39  from holding TransAKT or generate 144.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

TransAKT  vs.  Embrace Change Acquisition

TransAKT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TransAKT are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward-looking signals, TransAKT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Embrace Change Acqui

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Embrace Change is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TransAKT and Embrace Change

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

The idea behind TransAKT and Embrace Change Acquisition 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.