Correlation Between Launch One and Colombier Acquisition

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

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

Diversification Opportunities for Launch One and Colombier Acquisition

0.91

Correlation Coefficient

Launch One  Colombier Acquisition

Almost no diversification

The 3 months correlation between Launch and Colombier is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Launch One Acquisition and Colombier Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colombier Acquisition and Launch One 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 Launch One Acquisition are associated (or correlated) with Colombier Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colombier Acquisition has no effect on the direction of Launch One i.e., Launch One and Colombier Acquisition go up and down completely randomly.

Pair Corralation between Launch One and Colombier Acquisition

Given the investment horizon of 90 days Launch One is expected to generate 13.62 times less return on investment than Colombier Acquisition. But when comparing it to its historical volatility, Launch One Acquisition is 13.51 times less risky than Colombier Acquisition. It trades about 0.14 of its potential returns per unit of risk. Colombier Acquisition Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,022  in Colombier Acquisition Corp on October 9, 2024 and sell it today you would earn a total of  98.00  from holding Colombier Acquisition Corp or generate 9.59% return on investment over 90 days.

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

Launch One Acquisition  vs.  Colombier Acquisition Corp

Launch One Acquisition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Launch One is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Colombier Acquisition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Colombier Acquisition Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Colombier Acquisition may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Launch One and Colombier Acquisition

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

The idea behind Launch One Acquisition and Colombier 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.