Correlation Between Colombier Acquisition and FACT II

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

By analyzing existing cross correlation between Colombier Acquisition Corp and FACT II Acquisition, you can compare the effects of market volatilities on Colombier Acquisition and FACT II 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 Colombier Acquisition with a short position of FACT II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colombier Acquisition and FACT II.

Diversification Opportunities for Colombier Acquisition and FACT II

-0.39

Correlation Coefficient

Colombier Acquisition  FACT II

Very good diversification

The 3 months correlation between Colombier and FACT is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Colombier Acquisition Corp and FACT II Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FACT II Acquisition and Colombier 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 Colombier Acquisition Corp are associated (or correlated) with FACT II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FACT II Acquisition has no effect on the direction of Colombier Acquisition i.e., Colombier Acquisition and FACT II go up and down completely randomly.

Pair Corralation between Colombier Acquisition and FACT II

Given the investment horizon of 90 days Colombier Acquisition Corp is expected to generate 0.14 times more return on investment than FACT II. However, Colombier Acquisition Corp is 7.13 times less risky than FACT II. It trades about 0.14 of its potential returns per unit of risk. FACT II Acquisition is currently generating about 0.01 per unit of risk. If you would invest  1,136  in Colombier Acquisition Corp on October 8, 2024 and sell it today you would earn a total of  43.00  from holding Colombier Acquisition Corp or generate 3.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.63%
Values	Daily Returns

Colombier Acquisition Corp  vs.  FACT II Acquisition

Colombier Acquisition

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Colombier Acquisition Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Colombier Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

FACT II Acquisition

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FACT II Acquisition are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, FACT II may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Colombier Acquisition and FACT II

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

The idea behind Colombier Acquisition Corp and FACT II 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.