Correlation Between Pet Acquisition and Funko

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

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

Diversification Opportunities for Pet Acquisition and Funko

0.81

Correlation Coefficient

Pet Acquisition  Funko

Very poor diversification

The 3 months correlation between Pet and Funko is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pet Acquisition LLC and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko Inc and Pet 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 Pet Acquisition LLC are associated (or correlated) with Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of Pet Acquisition i.e., Pet Acquisition and Funko go up and down completely randomly.

Pair Corralation between Pet Acquisition and Funko

Given the investment horizon of 90 days Pet Acquisition LLC is expected to generate 2.13 times more return on investment than Funko. However, Pet Acquisition is 2.13 times more volatile than Funko Inc. It trades about 0.11 of its potential returns per unit of risk. Funko Inc is currently generating about 0.08 per unit of risk. If you would invest  306.00  in Pet Acquisition LLC on September 3, 2024 and sell it today you would earn a total of  121.00  from holding Pet Acquisition LLC or generate 39.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Pet Acquisition LLC  vs.  Funko Inc

Pet Acquisition LLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pet Acquisition LLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Pet Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Funko Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Funko Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward-looking signals, Funko displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pet Acquisition and Funko

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

The idea behind Pet Acquisition LLC and Funko Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.