Correlation Between Focus Impact and Mountain
Can any of the company-specific risk be diversified away by investing in both Focus Impact and Mountain 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 Focus Impact and Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focus Impact Acquisition and Mountain Co I, you can compare the effects of market volatilities on Focus Impact and Mountain 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 Focus Impact with a short position of Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Impact and Mountain.
Diversification Opportunities for Focus Impact and Mountain
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Focus and Mountain is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Focus Impact Acquisition and Mountain Co I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Co I and Focus Impact 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 Focus Impact Acquisition are associated (or correlated) with Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Co I has no effect on the direction of Focus Impact i.e., Focus Impact and Mountain go up and down completely randomly.
Pair Corralation between Focus Impact and Mountain
Assuming the 90 days horizon Focus Impact Acquisition is expected to under-perform the Mountain. In addition to that, Focus Impact is 1.17 times more volatile than Mountain Co I. It trades about -0.27 of its total potential returns per unit of risk. Mountain Co I is currently generating about 0.12 per unit of volatility. If you would invest 1.00 in Mountain Co I on August 30, 2024 and sell it today you would earn a total of 0.04 from holding Mountain Co I or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Focus Impact Acquisition vs. Mountain Co I
Performance |
| Timeline |
| Focus Impact Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Mountain Co I |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Focus Impact and Mountain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Focus Impact and Mountain
The main advantage of trading using opposite Focus Impact and Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Impact position performs unexpectedly, Mountain 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 Mountain will offset losses from the drop in Mountain's long position.The idea behind Focus Impact Acquisition and Mountain Co I 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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