Correlation Between Regional Management and Finnovate Acquisition

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

By analyzing existing cross correlation between Regional Management Corp and Finnovate Acquisition Corp, you can compare the effects of market volatilities on Regional Management and Finnovate 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 Regional Management with a short position of Finnovate Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Management and Finnovate Acquisition.

Diversification Opportunities for Regional Management and Finnovate Acquisition

-0.14

Correlation Coefficient

Regional Management  Finnovate Acquisition

Good diversification

The 3 months correlation between Regional and Finnovate is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and Finnovate Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnovate Acquisition and Regional Management 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 Regional Management Corp are associated (or correlated) with Finnovate Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnovate Acquisition has no effect on the direction of Regional Management i.e., Regional Management and Finnovate Acquisition go up and down completely randomly.

Pair Corralation between Regional Management and Finnovate Acquisition

Allowing for the 90-day total investment horizon Regional Management Corp is expected to under-perform the Finnovate Acquisition. In addition to that, Regional Management is 11.81 times more volatile than Finnovate Acquisition Corp. It trades about -0.03 of its total potential returns per unit of risk. Finnovate Acquisition Corp is currently generating about -0.12 per unit of volatility. If you would invest  1,165  in Finnovate Acquisition Corp on December 29, 2024 and sell it today you would lose (3.00) from holding Finnovate Acquisition Corp or give up 0.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	19.67%
Values	Daily Returns

Regional Management Corp  vs.  Finnovate Acquisition Corp

Regional Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Finnovate Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Finnovate Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Finnovate Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Regional Management and Finnovate Acquisition

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

The idea behind Regional Management Corp and Finnovate 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .