Correlation Between Launch One and Mountain Lake

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

Diversification Opportunities for Launch One and Mountain Lake

0.8

Correlation Coefficient

Launch One  Mountain Lake

Very poor diversification

The 3 months correlation between Launch and Mountain is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Launch One Acquisition and Mountain Lake Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Lake 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 Mountain Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Lake Acquisition has no effect on the direction of Launch One i.e., Launch One and Mountain Lake go up and down completely randomly.

Pair Corralation between Launch One and Mountain Lake

Assuming the 90 days horizon Launch One is expected to generate 1.69 times less return on investment than Mountain Lake. In addition to that, Launch One is 1.89 times more volatile than Mountain Lake Acquisition. It trades about 0.05 of its total potential returns per unit of risk. Mountain Lake Acquisition is currently generating about 0.17 per unit of volatility. If you would invest  1,002  in Mountain Lake Acquisition on December 23, 2024 and sell it today you would earn a total of  19.00  from holding Mountain Lake Acquisition or generate 1.9% return on investment over 90 days.

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

Launch One Acquisition  vs.  Mountain Lake Acquisition

Launch One Acquisition

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Launch One is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Mountain Lake Acquisition

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mountain Lake Acquisition are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Mountain Lake 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 Launch One and Mountain Lake

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

The idea behind Launch One Acquisition and Mountain Lake 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.