Correlation Between Aston Martin and Embrace Change

Can any of the company-specific risk be diversified away by investing in both Aston Martin and Embrace Change 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 Aston Martin and Embrace Change into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aston Martin Lagonda and Embrace Change Acquisition, you can compare the effects of market volatilities on Aston Martin and Embrace Change 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 Aston Martin with a short position of Embrace Change. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aston Martin and Embrace Change.

Diversification Opportunities for Aston Martin and Embrace Change

0.45

Correlation Coefficient

Aston Martin  Embrace Change

Very weak diversification

The 3 months correlation between Aston and Embrace is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Aston Martin Lagonda and Embrace Change Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embrace Change Acqui and Aston Martin 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 Aston Martin Lagonda are associated (or correlated) with Embrace Change. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embrace Change Acqui has no effect on the direction of Aston Martin i.e., Aston Martin and Embrace Change go up and down completely randomly.

Pair Corralation between Aston Martin and Embrace Change

Assuming the 90 days horizon Aston Martin Lagonda is expected to under-perform the Embrace Change. In addition to that, Aston Martin is 22.71 times more volatile than Embrace Change Acquisition. It trades about -0.11 of its total potential returns per unit of risk. Embrace Change Acquisition is currently generating about 0.23 per unit of volatility. If you would invest  1,165  in Embrace Change Acquisition on October 9, 2024 and sell it today you would earn a total of  5.00  from holding Embrace Change Acquisition or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Aston Martin Lagonda  vs.  Embrace Change Acquisition

Aston Martin Lagonda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aston Martin Lagonda has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Embrace Change Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embrace Change Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Embrace Change is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aston Martin and Embrace Change

The main advantage of trading using opposite Aston Martin and Embrace Change positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aston Martin position performs unexpectedly, Embrace Change 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 Embrace Change will offset losses from the drop in Embrace Change's long position.

The idea behind Aston Martin Lagonda and Embrace Change Acquisition 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.