Correlation Between Talon 1 and Crescera Capital

Can any of the company-specific risk be diversified away by investing in both Talon 1 and Crescera Capital 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 Talon 1 and Crescera Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Talon 1 Acquisition and Crescera Capital Acquisition, you can compare the effects of market volatilities on Talon 1 and Crescera Capital 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 Talon 1 with a short position of Crescera Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talon 1 and Crescera Capital.

Diversification Opportunities for Talon 1 and Crescera Capital

0.43

Correlation Coefficient

Talon 1  Crescera Capital

Very weak diversification

The 3 months correlation between Talon and Crescera is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Talon 1 Acquisition and Crescera Capital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescera Capital Acq and Talon 1 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 Talon 1 Acquisition are associated (or correlated) with Crescera Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescera Capital Acq has no effect on the direction of Talon 1 i.e., Talon 1 and Crescera Capital go up and down completely randomly.

Pair Corralation between Talon 1 and Crescera Capital

Assuming the 90 days horizon Talon 1 is expected to generate 2.21 times less return on investment than Crescera Capital. But when comparing it to its historical volatility, Talon 1 Acquisition is 1.26 times less risky than Crescera Capital. It trades about 0.1 of its potential returns per unit of risk. Crescera Capital Acquisition is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3.01  in Crescera Capital Acquisition on September 14, 2024 and sell it today you would earn a total of  2.14  from holding Crescera Capital Acquisition or generate 71.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.84%
Values	Daily Returns

Talon 1 Acquisition  vs.  Crescera Capital Acquisition

Talon 1 Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon 1 Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Talon 1 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Crescera Capital Acq

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Talon 1 and Crescera Capital

The main advantage of trading using opposite Talon 1 and Crescera Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talon 1 position performs unexpectedly, Crescera Capital 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 Crescera Capital will offset losses from the drop in Crescera Capital's long position.

The idea behind Talon 1 Acquisition and Crescera Capital 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.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.