Correlation Between Vine Hill and M3 Brigade

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

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

Diversification Opportunities for Vine Hill and M3 Brigade

0.28

Correlation Coefficient

Vine Hill  M3 Brigade

Modest diversification

The 3 months correlation between Vine and MBAVW is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vine Hill Capital 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 Vine Hill 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 Vine Hill Capital 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 Vine Hill i.e., Vine Hill and M3 Brigade go up and down completely randomly.

Pair Corralation between Vine Hill and M3 Brigade

Given the investment horizon of 90 days Vine Hill is expected to generate 111.52 times less return on investment than M3 Brigade. But when comparing it to its historical volatility, Vine Hill Capital is 64.9 times less risky than M3 Brigade. It trades about 0.1 of its potential returns per unit of risk. M3 Brigade Acquisition V is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  15.00  in M3 Brigade Acquisition V on September 24, 2024 and sell it today you would earn a total of  2.00  from holding M3 Brigade Acquisition V or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

Vine Hill Capital  vs.  M3 Brigade Acquisition V

Vine Hill Capital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vine Hill Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Vine Hill is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

M3 Brigade Acquisition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, M3 Brigade showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vine Hill and M3 Brigade

The main advantage of trading using opposite Vine Hill and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vine Hill 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 Vine Hill Capital 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.