Correlation Between Embrace Change and Lument Finance

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

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

Diversification Opportunities for Embrace Change and Lument Finance

0.33

Correlation Coefficient

Embrace Change  Lument Finance

Weak diversification

The 3 months correlation between Embrace and Lument is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and Lument Finance Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lument Finance Trust and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with Lument Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lument Finance Trust has no effect on the direction of Embrace Change i.e., Embrace Change and Lument Finance go up and down completely randomly.

Pair Corralation between Embrace Change and Lument Finance

Assuming the 90 days horizon Embrace Change Acquisition is expected to generate 10.78 times more return on investment than Lument Finance. However, Embrace Change is 10.78 times more volatile than Lument Finance Trust. It trades about 0.17 of its potential returns per unit of risk. Lument Finance Trust is currently generating about 0.06 per unit of risk. If you would invest  8.52  in Embrace Change Acquisition on December 29, 2024 and sell it today you would earn a total of  8.48  from holding Embrace Change Acquisition or generate 99.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.85%
Values	Daily Returns

Embrace Change Acquisition  vs.  Lument Finance Trust

Embrace Change Acqui

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Embrace Change reported solid returns over the last few months and may actually be approaching a breakup point.

Lument Finance Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Lument Finance is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Embrace Change and Lument Finance

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

The idea behind Embrace Change Acquisition and Lument Finance Trust 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 Global Correlations module to find global opportunities by holding instruments from different markets.