Correlation Between Mountain and Innovative International

Can any of the company-specific risk be diversified away by investing in both Mountain and Innovative International 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 Mountain and Innovative International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mountain Co I and Innovative International Acquisition, you can compare the effects of market volatilities on Mountain and Innovative International 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 Mountain with a short position of Innovative International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mountain and Innovative International.

Diversification Opportunities for Mountain and Innovative International

0.36

Correlation Coefficient

Mountain  Innovative International

Weak diversification

The 3 months correlation between Mountain and Innovative is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Co I and Innovative International Acqui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative International and Mountain 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 Mountain Co I are associated (or correlated) with Innovative International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative International has no effect on the direction of Mountain i.e., Mountain and Innovative International go up and down completely randomly.

Pair Corralation between Mountain and Innovative International

If you would invest  1.24  in Mountain Co I on September 13, 2024 and sell it today you would lose (0.20) from holding Mountain Co I or give up 16.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	7.69%
Values	Daily Returns

Mountain Co I  vs.  Innovative International Acqui

Mountain Co I

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Mountain Co I has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Mountain showed solid returns over the last few months and may actually be approaching a breakup point.

Innovative International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative International Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Innovative International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Mountain and Innovative International

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

The idea behind Mountain Co I and Innovative International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.