Correlation Between M3 Brigade and Coliseum Acquisition

Can any of the company-specific risk be diversified away by investing in both M3 Brigade and Coliseum 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 M3 Brigade and Coliseum Acquisition 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 Coliseum Acquisition Corp, you can compare the effects of market volatilities on M3 Brigade and Coliseum 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 M3 Brigade with a short position of Coliseum Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 Brigade and Coliseum Acquisition.

Diversification Opportunities for M3 Brigade and Coliseum Acquisition

0.76

Correlation Coefficient

M3 Brigade  Coliseum Acquisition

Poor diversification

The 3 months correlation between MBAV and Coliseum is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding M3 Brigade Acquisition V and Coliseum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coliseum Acquisition Corp 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 Coliseum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coliseum Acquisition Corp has no effect on the direction of M3 Brigade i.e., M3 Brigade and Coliseum Acquisition go up and down completely randomly.

Pair Corralation between M3 Brigade and Coliseum Acquisition

Given the investment horizon of 90 days M3 Brigade is expected to generate 6.35 times less return on investment than Coliseum Acquisition. But when comparing it to its historical volatility, M3 Brigade Acquisition V is 20.98 times less risky than Coliseum Acquisition. It trades about 0.21 of its potential returns per unit of risk. Coliseum Acquisition Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,113  in Coliseum Acquisition Corp on October 25, 2024 and sell it today you would earn a total of  38.00  from holding Coliseum Acquisition Corp or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.33%
Values	Daily Returns

M3 Brigade Acquisition V  vs.  Coliseum Acquisition Corp

M3 Brigade Acquisition

Risk-Adjusted Performance

16 of 100

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.

Coliseum Acquisition Corp

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Coliseum Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Coliseum Acquisition is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M3 Brigade and Coliseum Acquisition

The main advantage of trading using opposite M3 Brigade and Coliseum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 Brigade position performs unexpectedly, Coliseum 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 Coliseum Acquisition will offset losses from the drop in Coliseum Acquisition's long position.

The idea behind M3 Brigade Acquisition V and Coliseum 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.