Correlation Between Ross Acquisition and L Catterton
Can any of the company-specific risk be diversified away by investing in both Ross Acquisition and L Catterton 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 Ross Acquisition and L Catterton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Acquisition II and L Catterton Asia, you can compare the effects of market volatilities on Ross Acquisition and L Catterton 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 Ross Acquisition with a short position of L Catterton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Acquisition and L Catterton.
Diversification Opportunities for Ross Acquisition and L Catterton
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ross and LCAA is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Ross Acquisition II and L Catterton Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Catterton Asia and Ross 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 Ross Acquisition II are associated (or correlated) with L Catterton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Catterton Asia has no effect on the direction of Ross Acquisition i.e., Ross Acquisition and L Catterton go up and down completely randomly.
Pair Corralation between Ross Acquisition and L Catterton
Given the investment horizon of 90 days Ross Acquisition II is expected to generate 0.75 times more return on investment than L Catterton. However, Ross Acquisition II is 1.33 times less risky than L Catterton. It trades about 0.21 of its potential returns per unit of risk. L Catterton Asia is currently generating about 0.14 per unit of risk. If you would invest 1,007 in Ross Acquisition II on September 3, 2024 and sell it today you would earn a total of 54.00 from holding Ross Acquisition II or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.35% |
| Values | Daily Returns |
Ross Acquisition II vs. L Catterton Asia
Performance |
| Timeline |
| Ross Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| L Catterton Asia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ross Acquisition and L Catterton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Acquisition and L Catterton
The main advantage of trading using opposite Ross Acquisition and L Catterton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Acquisition position performs unexpectedly, L Catterton 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 L Catterton will offset losses from the drop in L Catterton's long position.The idea behind Ross Acquisition II and L Catterton Asia 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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