Correlation Between Valuence Merger and ESGEN Acquisition

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

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

Diversification Opportunities for Valuence Merger and ESGEN Acquisition

-0.24

Correlation Coefficient

Valuence Merger  ESGEN Acquisition

Very good diversification

The 3 months correlation between Valuence and ESGEN is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Valuence Merger Corp and ESGEN Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGEN Acquisition Corp and Valuence Merger 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 Valuence Merger Corp are associated (or correlated) with ESGEN Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGEN Acquisition Corp has no effect on the direction of Valuence Merger i.e., Valuence Merger and ESGEN Acquisition go up and down completely randomly.

Pair Corralation between Valuence Merger and ESGEN Acquisition

Assuming the 90 days horizon Valuence Merger Corp is expected to generate 158.61 times more return on investment than ESGEN Acquisition. However, Valuence Merger is 158.61 times more volatile than ESGEN Acquisition Corp. It trades about 0.13 of its potential returns per unit of risk. ESGEN Acquisition Corp is currently generating about 0.06 per unit of risk. If you would invest  4.99  in Valuence Merger Corp on September 16, 2024 and sell it today you would lose (1.94) from holding Valuence Merger Corp or give up 38.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.16%
Values	Daily Returns

Valuence Merger Corp  vs.  ESGEN Acquisition Corp

Valuence Merger Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

ESGEN Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Valuence Merger and ESGEN Acquisition

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

The idea behind Valuence Merger Corp and ESGEN 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.