Correlation Between Churchill Capital and CF Acquisition
Can any of the company-specific risk be diversified away by investing in both Churchill Capital and CF 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 Churchill Capital and CF Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Churchill Capital VI and CF Acquisition Corp, you can compare the effects of market volatilities on Churchill Capital and CF 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 Churchill Capital with a short position of CF Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Churchill Capital and CF Acquisition.
Diversification Opportunities for Churchill Capital and CF Acquisition
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Churchill and CFIVW is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Churchill Capital VI and CF Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition Corp and Churchill 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 Churchill Capital VI are associated (or correlated) with CF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Acquisition Corp has no effect on the direction of Churchill Capital i.e., Churchill Capital and CF Acquisition go up and down completely randomly.
Pair Corralation between Churchill Capital and CF Acquisition
Given the investment horizon of 90 days Churchill Capital is expected to generate 186.67 times less return on investment than CF Acquisition. But when comparing it to its historical volatility, Churchill Capital VI is 331.53 times less risky than CF Acquisition. It trades about 0.16 of its potential returns per unit of risk. CF Acquisition Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4.81 in CF Acquisition Corp on September 3, 2024 and sell it today you would earn a total of 3.19 from holding CF Acquisition Corp or generate 66.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.35% |
| Values | Daily Returns |
Churchill Capital VI vs. CF Acquisition Corp
Performance |
| Timeline |
| Churchill Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| CF Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Churchill Capital and CF Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Churchill Capital and CF Acquisition
The main advantage of trading using opposite Churchill Capital and CF Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Churchill Capital position performs unexpectedly, CF 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 CF Acquisition will offset losses from the drop in CF Acquisition's long position.The idea behind Churchill Capital VI and CF 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.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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