Correlation Between Welsbach Technology and HCM Acquisition

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

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

Diversification Opportunities for Welsbach Technology and HCM Acquisition

-0.21

Correlation Coefficient

Welsbach Technology  HCM Acquisition

Very good diversification

The 3 months correlation between Welsbach and HCM is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Welsbach Technology Metals and HCM Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Acquisition Corp and Welsbach Technology 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 Welsbach Technology Metals are associated (or correlated) with HCM Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Acquisition Corp has no effect on the direction of Welsbach Technology i.e., Welsbach Technology and HCM Acquisition go up and down completely randomly.

Pair Corralation between Welsbach Technology and HCM Acquisition

Given the investment horizon of 90 days Welsbach Technology is expected to generate 371.15 times less return on investment than HCM Acquisition. But when comparing it to its historical volatility, Welsbach Technology Metals is 108.57 times less risky than HCM Acquisition. It trades about 0.06 of its potential returns per unit of risk. HCM Acquisition Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  0.97  in HCM Acquisition Corp on September 21, 2024 and sell it today you would earn a total of  1.09  from holding HCM Acquisition Corp or generate 112.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	14.75%
Values	Daily Returns

Welsbach Technology Metals  vs.  HCM Acquisition Corp

Welsbach Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welsbach Technology Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Welsbach Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HCM Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCM Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, HCM Acquisition 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 Welsbach Technology and HCM Acquisition

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

The idea behind Welsbach Technology Metals and HCM 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.