Correlation Between M3 Brigade and Mountain Lake

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

Diversification Opportunities for M3 Brigade and Mountain Lake

-0.26

Correlation Coefficient

M3 Brigade  Mountain Lake

Very good diversification

The 3 months correlation between MBAV and Mountain is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding M3 Brigade Acquisition V 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 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 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 M3 Brigade i.e., M3 Brigade and Mountain Lake go up and down completely randomly.

Pair Corralation between M3 Brigade and Mountain Lake

Given the investment horizon of 90 days M3 Brigade is expected to generate 1.05 times less return on investment than Mountain Lake. In addition to that, M3 Brigade is 1.12 times more volatile than Mountain Lake Acquisition. It trades about 0.25 of its total potential returns per unit of risk. Mountain Lake Acquisition is currently generating about 0.3 per unit of volatility. If you would invest  995.00  in Mountain Lake Acquisition on December 25, 2024 and sell it today you would earn a total of  8.00  from holding Mountain Lake Acquisition or generate 0.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.32%
Values	Daily Returns

M3 Brigade Acquisition V  vs.  Mountain Lake Acquisition

M3 Brigade Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 19 (%) 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 recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mountain Lake Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mountain Lake Acquisition are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Mountain Lake is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with M3 Brigade and Mountain Lake

The main advantage of trading using opposite M3 Brigade and Mountain Lake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 Brigade 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 M3 Brigade Acquisition V 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.