Correlation Between Embrace Change and Pono Capital

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

By analyzing existing cross correlation between Embrace Change Acquisition and Pono Capital Two, you can compare the effects of market volatilities on Embrace Change and Pono 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 Embrace Change with a short position of Pono Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embrace Change and Pono Capital.

Diversification Opportunities for Embrace Change and Pono Capital

0.52

Correlation Coefficient

Embrace Change  Pono Capital

Very weak diversification

The 3 months correlation between Embrace and Pono is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and Pono Capital Two in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pono Capital Two and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with Pono Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pono Capital Two has no effect on the direction of Embrace Change i.e., Embrace Change and Pono Capital go up and down completely randomly.

Pair Corralation between Embrace Change and Pono Capital

Assuming the 90 days horizon Embrace Change Acquisition is expected to under-perform the Pono Capital. But the stock apears to be less risky and, when comparing its historical volatility, Embrace Change Acquisition is 7.19 times less risky than Pono Capital. The stock trades about -0.22 of its potential returns per unit of risk. The Pono Capital Two is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,326  in Pono Capital Two on March 21, 2024 and sell it today you would earn a total of  24.00  from holding Pono Capital Two or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Embrace Change Acquisition  vs.  Pono Capital Two

Embrace Change Acqui

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Embrace Change is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pono Capital Two

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pono Capital Two are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pono Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embrace Change and Pono Capital

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

The idea behind Embrace Change Acquisition and Pono Capital Two 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.