Correlation Between Target Hospitality and FTAC Emerald

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

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

Diversification Opportunities for Target Hospitality and FTAC Emerald

0.75

Correlation Coefficient

Target Hospitality  FTAC Emerald

Poor diversification

The 3 months correlation between Target and FTAC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Target Hospitality Corp and FTAC Emerald Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAC Emerald Acquisition and Target Hospitality 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 Target Hospitality Corp are associated (or correlated) with FTAC Emerald. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAC Emerald Acquisition has no effect on the direction of Target Hospitality i.e., Target Hospitality and FTAC Emerald go up and down completely randomly.

Pair Corralation between Target Hospitality and FTAC Emerald

Allowing for the 90-day total investment horizon Target Hospitality Corp is expected to generate 4.09 times more return on investment than FTAC Emerald. However, Target Hospitality is 4.09 times more volatile than FTAC Emerald Acquisition. It trades about 0.19 of its potential returns per unit of risk. FTAC Emerald Acquisition is currently generating about 0.08 per unit of risk. If you would invest  759.00  in Target Hospitality Corp on October 26, 2024 and sell it today you would earn a total of  277.00  from holding Target Hospitality Corp or generate 36.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	62.71%
Values	Daily Returns

Target Hospitality Corp  vs.  FTAC Emerald Acquisition

Target Hospitality Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target Hospitality Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Target Hospitality demonstrated solid returns over the last few months and may actually be approaching a breakup point.

FTAC Emerald Acquisition

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days FTAC Emerald Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, FTAC Emerald is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Target Hospitality and FTAC Emerald

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

The idea behind Target Hospitality Corp and FTAC Emerald 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.