Correlation Between M3 Brigade and YHN Acquisition

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

Diversification Opportunities for M3 Brigade and YHN Acquisition

-0.05

Correlation Coefficient

M3 Brigade  YHN Acquisition

Good diversification

The 3 months correlation between MBAVW and YHN is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding M3 Brigade Acquisition V and YHN Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YHN Acquisition I 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 YHN Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YHN Acquisition I has no effect on the direction of M3 Brigade i.e., M3 Brigade and YHN Acquisition go up and down completely randomly.

Pair Corralation between M3 Brigade and YHN Acquisition

Assuming the 90 days horizon M3 Brigade is expected to generate 1.23 times less return on investment than YHN Acquisition. In addition to that, M3 Brigade is 1.05 times more volatile than YHN Acquisition I. It trades about 0.17 of its total potential returns per unit of risk. YHN Acquisition I is currently generating about 0.22 per unit of volatility. If you would invest  11.00  in YHN Acquisition I on September 23, 2024 and sell it today you would earn a total of  1.00  from holding YHN Acquisition I or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	53.33%
Values	Daily Returns

M3 Brigade Acquisition V  vs.  YHN Acquisition I

M3 Brigade Acquisition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, M3 Brigade showed solid returns over the last few months and may actually be approaching a breakup point.

YHN Acquisition I

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in YHN Acquisition I are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, YHN Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M3 Brigade and YHN Acquisition

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

The idea behind M3 Brigade Acquisition V and YHN Acquisition I 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.