Correlation Between LMF Acquisition and Transcode Therapeutics

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

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

Diversification Opportunities for LMF Acquisition and Transcode Therapeutics

-0.32

Correlation Coefficient

LMF Acquisition  Transcode Therapeutics

Very good diversification

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

Pair Corralation between LMF Acquisition and Transcode Therapeutics

Considering the 90-day investment horizon LMF Acquisition Opportunities is expected to generate 0.33 times more return on investment than Transcode Therapeutics. However, LMF Acquisition Opportunities is 2.99 times less risky than Transcode Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Transcode Therapeutics is currently generating about -0.1 per unit of risk. If you would invest  200.00  in LMF Acquisition Opportunities on December 28, 2024 and sell it today you would earn a total of  20.00  from holding LMF Acquisition Opportunities or generate 10.0% return on investment over 90 days.

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

LMF Acquisition Opportunities  vs.  Transcode Therapeutics

LMF Acquisition Oppo

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LMF Acquisition Opportunities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, LMF Acquisition unveiled solid returns over the last few months and may actually be approaching a breakup point.

Transcode Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transcode Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LMF Acquisition and Transcode Therapeutics

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

The idea behind LMF Acquisition Opportunities and Transcode Therapeutics 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.