Correlation Between Tastemaker Acquisition and RMG Acquisition

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

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

Diversification Opportunities for Tastemaker Acquisition and RMG Acquisition

0.31

Correlation Coefficient

Tastemaker Acquisition  RMG Acquisition

Weak diversification

The 3 months correlation between Tastemaker and RMG is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tastemaker Acquisition Corp and RMG Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMG Acquisition Corp and Tastemaker Acquisition 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 Tastemaker Acquisition Corp are associated (or correlated) with RMG Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMG Acquisition Corp has no effect on the direction of Tastemaker Acquisition i.e., Tastemaker Acquisition and RMG Acquisition go up and down completely randomly.

Pair Corralation between Tastemaker Acquisition and RMG Acquisition

Assuming the 90 days horizon Tastemaker Acquisition is expected to generate 2.31 times less return on investment than RMG Acquisition. But when comparing it to its historical volatility, Tastemaker Acquisition Corp is 1.32 times less risky than RMG Acquisition. It trades about 0.06 of its potential returns per unit of risk. RMG Acquisition Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5.00  in RMG Acquisition Corp on September 16, 2024 and sell it today you would earn a total of  3.93  from holding RMG Acquisition Corp or generate 78.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.44%
Values	Daily Returns

Tastemaker Acquisition Corp  vs.  RMG Acquisition Corp

Tastemaker Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

RMG Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RMG Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, RMG Acquisition 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 Tastemaker Acquisition and RMG Acquisition

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

The idea behind Tastemaker Acquisition Corp and RMG 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.