Correlation Between M3 Brigade and Jaws Mustang

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Can any of the company-specific risk be diversified away by investing in both M3 Brigade and Jaws Mustang 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 M3 Brigade and Jaws Mustang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M3 Brigade Acquisition V and Jaws Mustang Acquisition, you can compare the effects of market volatilities on M3 Brigade and Jaws Mustang 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 M3 Brigade with a short position of Jaws Mustang. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 Brigade and Jaws Mustang.

Diversification Opportunities for M3 Brigade and Jaws Mustang

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between MBAV and Jaws is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding M3 Brigade Acquisition V and Jaws Mustang Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jaws Mustang Acquisition and M3 Brigade 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 M3 Brigade Acquisition V are associated (or correlated) with Jaws Mustang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jaws Mustang Acquisition has no effect on the direction of M3 Brigade i.e., M3 Brigade and Jaws Mustang go up and down completely randomly.

Pair Corralation between M3 Brigade and Jaws Mustang

Given the investment horizon of 90 days M3 Brigade is expected to generate 2.07 times less return on investment than Jaws Mustang. But when comparing it to its historical volatility, M3 Brigade Acquisition V is 4.22 times less risky than Jaws Mustang. It trades about 0.16 of its potential returns per unit of risk. Jaws Mustang Acquisition is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,008  in Jaws Mustang Acquisition on October 25, 2024 and sell it today you would earn a total of  122.00  from holding Jaws Mustang Acquisition or generate 12.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy18.79%
ValuesDaily Returns

M3 Brigade Acquisition V  vs.  Jaws Mustang Acquisition

 Performance 
       Timeline  
M3 Brigade Acquisition 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, M3 Brigade is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Jaws Mustang Acquisition 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Jaws Mustang Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jaws Mustang is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

M3 Brigade and Jaws Mustang Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with M3 Brigade and Jaws Mustang

The main advantage of trading using opposite M3 Brigade and Jaws Mustang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 Brigade position performs unexpectedly, Jaws Mustang 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 Jaws Mustang will offset losses from the drop in Jaws Mustang's long position.
The idea behind M3 Brigade Acquisition V and Jaws Mustang 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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