Correlation Between Stonebridge Acquisition and MDC Holdings
Can any of the company-specific risk be diversified away by investing in both Stonebridge Acquisition and MDC Holdings 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 Stonebridge Acquisition and MDC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stonebridge Acquisition Corp and MDC Holdings, you can compare the effects of market volatilities on Stonebridge Acquisition and MDC Holdings 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 Stonebridge Acquisition with a short position of MDC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stonebridge Acquisition and MDC Holdings.
Diversification Opportunities for Stonebridge Acquisition and MDC Holdings
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Stonebridge and MDC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Stonebridge Acquisition Corp and MDC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDC Holdings and Stonebridge Acquisition 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 Stonebridge Acquisition Corp are associated (or correlated) with MDC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDC Holdings has no effect on the direction of Stonebridge Acquisition i.e., Stonebridge Acquisition and MDC Holdings go up and down completely randomly.
Pair Corralation between Stonebridge Acquisition and MDC Holdings
Given the investment horizon of 90 days Stonebridge Acquisition is expected to generate 5.89 times less return on investment than MDC Holdings. But when comparing it to its historical volatility, Stonebridge Acquisition Corp is 7.45 times less risky than MDC Holdings. It trades about 0.19 of its potential returns per unit of risk. MDC Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,155 in MDC Holdings on September 2, 2024 and sell it today you would earn a total of 1,550 from holding MDC Holdings or generate 49.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stonebridge Acquisition Corp vs. MDC Holdings
Performance |
| Timeline |
| Stonebridge Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| MDC Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Stonebridge Acquisition and MDC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stonebridge Acquisition and MDC Holdings
The main advantage of trading using opposite Stonebridge Acquisition and MDC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stonebridge Acquisition position performs unexpectedly, MDC Holdings 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 MDC Holdings will offset losses from the drop in MDC Holdings' long position.The idea behind Stonebridge Acquisition Corp and MDC Holdings 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.| MDC Holdings vs. Taylor Morn Home | MDC Holdings vs. Century Communities | MDC Holdings vs. Beazer Homes USA | MDC Holdings vs. Meritage |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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