Correlation Between Launch One and FACT II

Can any of the company-specific risk be diversified away by investing in both Launch One and FACT II 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 FACT II 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 FACT II Acquisition, you can compare the effects of market volatilities on Launch One and FACT II 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 FACT II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Launch One and FACT II.

Diversification Opportunities for Launch One and FACT II

0.13

Correlation Coefficient

Launch One  FACT II

Average diversification

The 3 months correlation between Launch and FACT is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Launch One Acquisition and FACT II Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FACT II 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 FACT II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FACT II Acquisition has no effect on the direction of Launch One i.e., Launch One and FACT II go up and down completely randomly.

Pair Corralation between Launch One and FACT II

Given the investment horizon of 90 days Launch One is expected to generate 74.68 times less return on investment than FACT II. But when comparing it to its historical volatility, Launch One Acquisition is 176.17 times less risky than FACT II. It trades about 0.42 of its potential returns per unit of risk. FACT II Acquisition is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  991.00  in FACT II Acquisition on October 24, 2024 and sell it today you would earn a total of  297.00  from holding FACT II Acquisition or generate 29.97% return on investment over 90 days.

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

Launch One Acquisition  vs.  FACT II Acquisition

Launch One Acquisition

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 16 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

FACT II Acquisition

Risk-Adjusted Performance

4 of 100

Good

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

Pair Trading with Launch One and FACT II

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

The idea behind Launch One Acquisition and FACT II 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.