Correlation Between Dlocal and Colombier Acquisition

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

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

Diversification Opportunities for Dlocal and Colombier Acquisition

0.75

Correlation Coefficient

Dlocal  Colombier Acquisition

Poor diversification

The 3 months correlation between Dlocal and Colombier is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dlocal and Colombier Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colombier Acquisition and Dlocal 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 Dlocal are associated (or correlated) with Colombier Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colombier Acquisition has no effect on the direction of Dlocal i.e., Dlocal and Colombier Acquisition go up and down completely randomly.

Pair Corralation between Dlocal and Colombier Acquisition

Considering the 90-day investment horizon Dlocal is expected to generate 2.72 times more return on investment than Colombier Acquisition. However, Dlocal is 2.72 times more volatile than Colombier Acquisition Corp. It trades about 0.14 of its potential returns per unit of risk. Colombier Acquisition Corp is currently generating about 0.14 per unit of risk. If you would invest  920.00  in Dlocal on October 9, 2024 and sell it today you would earn a total of  256.00  from holding Dlocal or generate 27.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Dlocal  vs.  Colombier Acquisition Corp

Dlocal

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dlocal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Dlocal displayed solid returns over the last few months and may actually be approaching a breakup point.

Colombier Acquisition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Colombier Acquisition Corp are ranked lower than 10 (%) 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.

Pair Trading with Dlocal and Colombier Acquisition

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

The idea behind Dlocal and Colombier Acquisition Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.