Correlation Between Metal Sky and CF Acquisition
Can any of the company-specific risk be diversified away by investing in both Metal Sky 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 Metal Sky and CF Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metal Sky Star and CF Acquisition VII, you can compare the effects of market volatilities on Metal Sky 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 Metal Sky with a short position of CF Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metal Sky and CF Acquisition.
Diversification Opportunities for Metal Sky and CF Acquisition
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metal and CFFS is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Metal Sky Star and CF Acquisition VII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition VII and Metal Sky 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 Metal Sky Star 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 VII has no effect on the direction of Metal Sky i.e., Metal Sky and CF Acquisition go up and down completely randomly.
Pair Corralation between Metal Sky and CF Acquisition
Given the investment horizon of 90 days Metal Sky Star is expected to generate 3.1 times more return on investment than CF Acquisition. However, Metal Sky is 3.1 times more volatile than CF Acquisition VII. It trades about 0.1 of its potential returns per unit of risk. CF Acquisition VII is currently generating about 0.06 per unit of risk. If you would invest 1,132 in Metal Sky Star on September 1, 2024 and sell it today you would earn a total of 78.00 from holding Metal Sky Star or generate 6.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metal Sky Star vs. CF Acquisition VII
Performance |
| Timeline |
| Metal Sky Star |
| CF Acquisition VII |
Metal Sky and CF Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metal Sky and CF Acquisition
The main advantage of trading using opposite Metal Sky and CF Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metal Sky 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 Metal Sky Star and CF Acquisition VII 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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