Correlation Between Sparta Capital and AltC Acquisition

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

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

Diversification Opportunities for Sparta Capital and AltC Acquisition

0.64

Correlation Coefficient

Sparta Capital  AltC Acquisition

Poor diversification

The 3 months correlation between Sparta and AltC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and AltC Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltC Acquisition Corp and Sparta Capital 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 Sparta Capital are associated (or correlated) with AltC Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltC Acquisition Corp has no effect on the direction of Sparta Capital i.e., Sparta Capital and AltC Acquisition go up and down completely randomly.

Pair Corralation between Sparta Capital and AltC Acquisition

Assuming the 90 days horizon Sparta Capital is expected to generate 2.97 times more return on investment than AltC Acquisition. However, Sparta Capital is 2.97 times more volatile than AltC Acquisition Corp. It trades about 0.09 of its potential returns per unit of risk. AltC Acquisition Corp is currently generating about 0.23 per unit of risk. If you would invest  1.21  in Sparta Capital on March 14, 2024 and sell it today you would earn a total of  0.75  from holding Sparta Capital or generate 61.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	66.13%
Values	Daily Returns

Sparta Capital  vs.  AltC Acquisition Corp

Sparta Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sparta Capital reported solid returns over the last few months and may actually be approaching a breakup point.

AltC Acquisition Corp

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days AltC Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather inconsistent fundamental indicators, AltC Acquisition exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparta Capital and AltC Acquisition

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

The idea behind Sparta Capital and AltC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.