Correlation Between SEP Acquisition and Western Acquisition

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

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

Diversification Opportunities for SEP Acquisition and Western Acquisition

0.5

Correlation Coefficient

SEP Acquisition  Western Acquisition

Very weak diversification

The 3 months correlation between SEP and Western is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SEP Acquisition Corp and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition and SEP Acquisition 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 SEP Acquisition Corp are associated (or correlated) with Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of SEP Acquisition i.e., SEP Acquisition and Western Acquisition go up and down completely randomly.

Pair Corralation between SEP Acquisition and Western Acquisition

Assuming the 90 days horizon SEP Acquisition Corp is expected to generate 33.24 times more return on investment than Western Acquisition. However, SEP Acquisition is 33.24 times more volatile than Western Acquisition Ventures. It trades about 0.22 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.3 per unit of risk. If you would invest  963.00  in SEP Acquisition Corp on January 30, 2024 and sell it today you would earn a total of  388.00  from holding SEP Acquisition Corp or generate 40.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SEP Acquisition Corp  vs.  Western Acquisition Ventures

SEP Acquisition Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEP Acquisition Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SEP Acquisition unveiled solid returns over the last few months and may actually be approaching a breakup point.

Western Acquisition

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SEP Acquisition and Western Acquisition

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

The idea behind SEP Acquisition Corp and Western Acquisition Ventures 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.