Correlation Between Fusion Acquisition and Kingswood Acquisition

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

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

Diversification Opportunities for Fusion Acquisition and Kingswood Acquisition

0.32

Correlation Coefficient

Fusion Acquisition  Kingswood Acquisition

Weak diversification

The 3 months correlation between Fusion and Kingswood is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fusion Acquisition Corp and Kingswood Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingswood Acquisition and Fusion 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 Fusion Acquisition Corp are associated (or correlated) with Kingswood Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingswood Acquisition has no effect on the direction of Fusion Acquisition i.e., Fusion Acquisition and Kingswood Acquisition go up and down completely randomly.

Pair Corralation between Fusion Acquisition and Kingswood Acquisition

Given the investment horizon of 90 days Fusion Acquisition is expected to generate 707.77 times less return on investment than Kingswood Acquisition. But when comparing it to its historical volatility, Fusion Acquisition Corp is 803.93 times less risky than Kingswood Acquisition. It trades about 0.18 of its potential returns per unit of risk. Kingswood Acquisition Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3.97  in Kingswood Acquisition Corp on September 16, 2024 and sell it today you would lose (3.15) from holding Kingswood Acquisition Corp or give up 79.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	27.08%
Values	Daily Returns

Fusion Acquisition Corp  vs.  Kingswood Acquisition Corp

Fusion Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fusion Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fusion Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kingswood Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingswood Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Kingswood Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fusion Acquisition and Kingswood Acquisition

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

The idea behind Fusion Acquisition Corp and Kingswood 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.

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