Correlation Between USCorp and Coastal Capital

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

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

Diversification Opportunities for USCorp and Coastal Capital

0.0

Correlation Coefficient

USCorp  Coastal Capital

Pay attention - limited upside

The 3 months correlation between USCorp and Coastal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding USCorp and Coastal Capital Acq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Capital Acq and USCorp 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 USCorp are associated (or correlated) with Coastal Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Capital Acq has no effect on the direction of USCorp i.e., USCorp and Coastal Capital go up and down completely randomly.

Pair Corralation between USCorp and Coastal Capital

Given the investment horizon of 90 days USCorp is expected to under-perform the Coastal Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, USCorp is 1.82 times less risky than Coastal Capital. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Coastal Capital Acq is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.14  in Coastal Capital Acq on September 10, 2024 and sell it today you would earn a total of  0.00  from holding Coastal Capital Acq or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

USCorp  vs.  Coastal Capital Acq

USCorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Coastal Capital Acq

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Capital Acq are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Coastal Capital revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with USCorp and Coastal Capital

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

The idea behind USCorp and Coastal Capital Acq 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.