Correlation Between Digital World and Churchill Capital

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Can any of the company-specific risk be diversified away by investing in both Digital World and Churchill Capital 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 Digital World and Churchill Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital World Acquisition and Churchill Capital Corp, you can compare the effects of market volatilities on Digital World and Churchill Capital 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 Digital World with a short position of Churchill Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital World and Churchill Capital.

Diversification Opportunities for Digital World and Churchill Capital

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Digital and Churchill is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Digital World Acquisition and Churchill Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Capital Corp and Digital World 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 Digital World Acquisition are associated (or correlated) with Churchill Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Churchill Capital Corp has no effect on the direction of Digital World i.e., Digital World and Churchill Capital go up and down completely randomly.

Pair Corralation between Digital World and Churchill Capital

Given the investment horizon of 90 days Digital World Acquisition is expected to generate 98.97 times more return on investment than Churchill Capital. However, Digital World is 98.97 times more volatile than Churchill Capital Corp. It trades about 0.15 of its potential returns per unit of risk. Churchill Capital Corp is currently generating about 0.15 per unit of risk. If you would invest  4,563  in Digital World Acquisition on December 29, 2023 and sell it today you would earn a total of  1,236  from holding Digital World Acquisition or generate 27.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Digital World Acquisition  vs.  Churchill Capital Corp

 Performance 
       Timeline  
Digital World Acquisition 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Digital World Acquisition are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Digital World exhibited solid returns over the last few months and may actually be approaching a breakup point.
Churchill Capital Corp 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Churchill Capital Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Churchill Capital is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Digital World and Churchill Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Digital World and Churchill Capital

The main advantage of trading using opposite Digital World and Churchill Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital World position performs unexpectedly, Churchill Capital 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 Churchill Capital will offset losses from the drop in Churchill Capital's long position.
The idea behind Digital World Acquisition and Churchill Capital 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.
Check out your portfolio center.
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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