Correlation Between Inflection Point and Encore Wire

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

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

Diversification Opportunities for Inflection Point and Encore Wire

0.74

Correlation Coefficient

Inflection Point  Encore Wire

Poor diversification

The 3 months correlation between Inflection and Encore is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Inflection Point Acquisition and Encore Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Wire and Inflection Point 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 Inflection Point Acquisition are associated (or correlated) with Encore Wire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Wire has no effect on the direction of Inflection Point i.e., Inflection Point and Encore Wire go up and down completely randomly.

Pair Corralation between Inflection Point and Encore Wire

Assuming the 90 days horizon Inflection Point Acquisition is expected to generate 27.15 times more return on investment than Encore Wire. However, Inflection Point is 27.15 times more volatile than Encore Wire. It trades about 0.07 of its potential returns per unit of risk. Encore Wire is currently generating about 0.1 per unit of risk. If you would invest  0.00  in Inflection Point Acquisition on January 31, 2024 and sell it today you would earn a total of  1,057  from holding Inflection Point Acquisition or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	71.12%
Values	Daily Returns

Inflection Point Acquisition  vs.  Encore Wire

Inflection Point Acq

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inflection Point Acquisition are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Inflection Point is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Encore Wire

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Wire are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Encore Wire exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inflection Point and Encore Wire

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

The idea behind Inflection Point Acquisition and Encore Wire 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.