Correlation Between Carlyle and LatAmGrowth SPAC

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

By analyzing existing cross correlation between Carlyle Group and LatAmGrowth SPAC, you can compare the effects of market volatilities on Carlyle and LatAmGrowth SPAC 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 Carlyle with a short position of LatAmGrowth SPAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and LatAmGrowth SPAC.

Diversification Opportunities for Carlyle and LatAmGrowth SPAC

0.94

Correlation Coefficient

Carlyle  LatAmGrowth SPAC

Almost no diversification

The 3 months correlation between Carlyle and LatAmGrowth is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and LatAmGrowth SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LatAmGrowth SPAC and Carlyle 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 Carlyle Group are associated (or correlated) with LatAmGrowth SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LatAmGrowth SPAC has no effect on the direction of Carlyle i.e., Carlyle and LatAmGrowth SPAC go up and down completely randomly.

Pair Corralation between Carlyle and LatAmGrowth SPAC

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 27.26 times more return on investment than LatAmGrowth SPAC. However, Carlyle is 27.26 times more volatile than LatAmGrowth SPAC. It trades about 0.25 of its potential returns per unit of risk. LatAmGrowth SPAC is currently generating about 0.29 per unit of risk. If you would invest  3,822  in Carlyle Group on September 3, 2024 and sell it today you would earn a total of  1,501  from holding Carlyle Group or generate 39.27% return on investment over 90 days.

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

Carlyle Group  vs.  LatAmGrowth SPAC

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

LatAmGrowth SPAC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LatAmGrowth SPAC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LatAmGrowth SPAC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carlyle and LatAmGrowth SPAC

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

The idea behind Carlyle Group and LatAmGrowth SPAC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.