Correlation Between CO2 Energy and M3 Brigade

Can any of the company-specific risk be diversified away by investing in both CO2 Energy and M3 Brigade 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 CO2 Energy and M3 Brigade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CO2 Energy Transition and M3 Brigade Acquisition V, you can compare the effects of market volatilities on CO2 Energy and M3 Brigade 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 CO2 Energy with a short position of M3 Brigade. Check out your portfolio center. Please also check ongoing floating volatility patterns of CO2 Energy and M3 Brigade.

Diversification Opportunities for CO2 Energy and M3 Brigade

-0.6

Correlation Coefficient

CO2 Energy  M3 Brigade

Excellent diversification

The 3 months correlation between CO2 and MBAV is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CO2 Energy Transition and M3 Brigade Acquisition V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Brigade Acquisition and CO2 Energy 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 CO2 Energy Transition are associated (or correlated) with M3 Brigade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Brigade Acquisition has no effect on the direction of CO2 Energy i.e., CO2 Energy and M3 Brigade go up and down completely randomly.

Pair Corralation between CO2 Energy and M3 Brigade

Assuming the 90 days horizon CO2 Energy Transition is expected to generate 1.44 times more return on investment than M3 Brigade. However, CO2 Energy is 1.44 times more volatile than M3 Brigade Acquisition V. It trades about 0.27 of its potential returns per unit of risk. M3 Brigade Acquisition V is currently generating about 0.15 per unit of risk. If you would invest  998.00  in CO2 Energy Transition on September 22, 2024 and sell it today you would earn a total of  7.00  from holding CO2 Energy Transition or generate 0.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	32.81%
Values	Daily Returns

CO2 Energy Transition  vs.  M3 Brigade Acquisition V

CO2 Energy Transition

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CO2 Energy Transition are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, CO2 Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

M3 Brigade Acquisition

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 11 (%) 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.

Pair Trading with CO2 Energy and M3 Brigade

The main advantage of trading using opposite CO2 Energy and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CO2 Energy position performs unexpectedly, M3 Brigade 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 M3 Brigade will offset losses from the drop in M3 Brigade's long position.

The idea behind CO2 Energy Transition and M3 Brigade Acquisition V 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.