Correlation Between Colombier Acquisition and LatAmGrowth SPAC

Can any of the company-specific risk be diversified away by investing in both Colombier Acquisition 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 Colombier Acquisition and LatAmGrowth SPAC 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 LatAmGrowth SPAC, you can compare the effects of market volatilities on Colombier Acquisition 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 Colombier Acquisition with a short position of LatAmGrowth SPAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colombier Acquisition and LatAmGrowth SPAC.

Diversification Opportunities for Colombier Acquisition and LatAmGrowth SPAC

0.1

Correlation Coefficient

Colombier Acquisition  LatAmGrowth SPAC

Average diversification

The 3 months correlation between Colombier and LatAmGrowth is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Colombier Acquisition Corp and LatAmGrowth SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LatAmGrowth SPAC 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 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 Colombier Acquisition i.e., Colombier Acquisition and LatAmGrowth SPAC go up and down completely randomly.

Pair Corralation between Colombier Acquisition and LatAmGrowth SPAC

Given the investment horizon of 90 days Colombier Acquisition is expected to generate 1.39 times less return on investment than LatAmGrowth SPAC. But when comparing it to its historical volatility, Colombier Acquisition Corp is 1.17 times less risky than LatAmGrowth SPAC. It trades about 0.02 of its potential returns per unit of risk. LatAmGrowth SPAC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,034  in LatAmGrowth SPAC on October 25, 2024 and sell it today you would earn a total of  156.00  from holding LatAmGrowth SPAC or generate 15.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.81%
Values	Daily Returns

Colombier Acquisition Corp  vs.  LatAmGrowth SPAC

Colombier Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Colombier Acquisition Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Colombier Acquisition may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LatAmGrowth SPAC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LatAmGrowth SPAC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, LatAmGrowth SPAC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Colombier Acquisition and LatAmGrowth SPAC

The main advantage of trading using opposite Colombier Acquisition and LatAmGrowth SPAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colombier Acquisition 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 Colombier Acquisition Corp 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.