Correlation Between Acacia Research and Smart Powerr

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

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

Diversification Opportunities for Acacia Research and Smart Powerr

-0.65

Correlation Coefficient

Acacia Research  Smart Powerr

Excellent diversification

The 3 months correlation between Acacia and Smart is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Acacia Research and Smart Powerr Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Powerr Corp and Acacia Research 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 Acacia Research are associated (or correlated) with Smart Powerr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Powerr Corp has no effect on the direction of Acacia Research i.e., Acacia Research and Smart Powerr go up and down completely randomly.

Pair Corralation between Acacia Research and Smart Powerr

Given the investment horizon of 90 days Acacia Research is expected to generate 0.36 times more return on investment than Smart Powerr. However, Acacia Research is 2.8 times less risky than Smart Powerr. It trades about 0.43 of its potential returns per unit of risk. Smart Powerr Corp is currently generating about 0.05 per unit of risk. If you would invest  489.00  in Acacia Research on February 27, 2024 and sell it today you would earn a total of  66.00  from holding Acacia Research or generate 13.5% return on investment over 90 days.

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

Acacia Research  vs.  Smart Powerr Corp

Acacia Research

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Acacia Research are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Acacia Research reported solid returns over the last few months and may actually be approaching a breakup point.

Smart Powerr Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Powerr Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Acacia Research and Smart Powerr

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

The idea behind Acacia Research and Smart Powerr 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.