Correlation Between 7GC Co and Compass Digital

Can any of the company-specific risk be diversified away by investing in both 7GC Co and Compass Digital 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 7GC Co and Compass Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 7GC Co Holdings and Compass Digital Acquisition, you can compare the effects of market volatilities on 7GC Co and Compass Digital 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 7GC Co with a short position of Compass Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of 7GC Co and Compass Digital.

Diversification Opportunities for 7GC Co and Compass Digital

0.19

Correlation Coefficient

7GC Co  Compass Digital

Average diversification

The 3 months correlation between 7GC and Compass is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding 7GC Co Holdings and Compass Digital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Digital Acqu and 7GC Co 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 7GC Co Holdings are associated (or correlated) with Compass Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Digital Acqu has no effect on the direction of 7GC Co i.e., 7GC Co and Compass Digital go up and down completely randomly.

Pair Corralation between 7GC Co and Compass Digital

Assuming the 90 days horizon 7GC Co is expected to generate 7.72 times less return on investment than Compass Digital. But when comparing it to its historical volatility, 7GC Co Holdings is 5.38 times less risky than Compass Digital. It trades about 0.11 of its potential returns per unit of risk. Compass Digital Acquisition is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Compass Digital Acquisition on October 10, 2024 and sell it today you would lose (2.67) from holding Compass Digital Acquisition or give up 29.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	45.81%
Values	Daily Returns

7GC Co Holdings  vs.  Compass Digital Acquisition

7GC Co Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 7GC Co Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, 7GC Co is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Compass Digital Acqu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compass Digital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with 7GC Co and Compass Digital

The main advantage of trading using opposite 7GC Co and Compass Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 7GC Co position performs unexpectedly, Compass Digital 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 Compass Digital will offset losses from the drop in Compass Digital's long position.

The idea behind 7GC Co Holdings and Compass Digital 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.