Correlation Between FACT II and Distoken Acquisition

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

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

Diversification Opportunities for FACT II and Distoken Acquisition

-0.11

Correlation Coefficient

FACT II  Distoken Acquisition

Good diversification

The 3 months correlation between FACT and Distoken is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding FACT II Acquisition and Distoken Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distoken Acquisition and FACT II 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 FACT II Acquisition are associated (or correlated) with Distoken Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distoken Acquisition has no effect on the direction of FACT II i.e., FACT II and Distoken Acquisition go up and down completely randomly.

Pair Corralation between FACT II and Distoken Acquisition

Assuming the 90 days horizon FACT II Acquisition is expected to generate 56.54 times more return on investment than Distoken Acquisition. However, FACT II is 56.54 times more volatile than Distoken Acquisition. It trades about 0.12 of its potential returns per unit of risk. Distoken Acquisition is currently generating about -0.24 per unit of risk. If you would invest  17.00  in FACT II Acquisition on October 25, 2024 and sell it today you would earn a total of  1.00  from holding FACT II Acquisition or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

FACT II Acquisition  vs.  Distoken Acquisition

FACT II Acquisition

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days FACT II Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly inconsistent basic indicators, FACT II showed solid returns over the last few months and may actually be approaching a breakup point.

Distoken Acquisition

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Distoken Acquisition are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Distoken Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FACT II and Distoken Acquisition

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

The idea behind FACT II Acquisition and Distoken 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.