Correlation Between Forum Merger and L Catterton

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

By analyzing existing cross correlation between Forum Merger IV and L Catterton Asia, you can compare the effects of market volatilities on Forum Merger and L Catterton 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 Forum Merger with a short position of L Catterton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Merger and L Catterton.

Diversification Opportunities for Forum Merger and L Catterton

-0.49

Correlation Coefficient

Forum Merger  L Catterton

Very good diversification

The 3 months correlation between Forum and LCAAU is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Forum Merger IV and L Catterton Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Catterton Asia and Forum Merger 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 Forum Merger IV are associated (or correlated) with L Catterton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Catterton Asia has no effect on the direction of Forum Merger i.e., Forum Merger and L Catterton go up and down completely randomly.

Pair Corralation between Forum Merger and L Catterton

If you would invest  1,064  in L Catterton Asia on September 19, 2024 and sell it today you would earn a total of  0.00  from holding L Catterton Asia or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Forum Merger IV  vs.  L Catterton Asia

Forum Merger IV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forum Merger IV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Forum Merger is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

L Catterton Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L Catterton Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, L Catterton is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Forum Merger and L Catterton

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

The idea behind Forum Merger IV and L Catterton Asia 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.