Correlation Between CF Acquisition and Armada Acquisition

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

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

Diversification Opportunities for CF Acquisition and Armada Acquisition

-0.22

Correlation Coefficient

CF Acquisition  Armada Acquisition

Very good diversification

The 3 months correlation between CFFS and Armada is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CF Acquisition VII and Armada Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Acquisition Corp and CF 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 CF Acquisition VII are associated (or correlated) with Armada Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Acquisition Corp has no effect on the direction of CF Acquisition i.e., CF Acquisition and Armada Acquisition go up and down completely randomly.

Pair Corralation between CF Acquisition and Armada Acquisition

Given the investment horizon of 90 days CF Acquisition VII is expected to generate 0.03 times more return on investment than Armada Acquisition. However, CF Acquisition VII is 35.5 times less risky than Armada Acquisition. It trades about 0.08 of its potential returns per unit of risk. Armada Acquisition Corp is currently generating about -0.07 per unit of risk. If you would invest  1,083  in CF Acquisition VII on September 17, 2024 and sell it today you would earn a total of  50.00  from holding CF Acquisition VII or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.02%
Values	Daily Returns

CF Acquisition VII  vs.  Armada Acquisition Corp

CF Acquisition VII

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Acquisition VII are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, CF Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Armada Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CF Acquisition and Armada Acquisition

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

The idea behind CF Acquisition VII and Armada 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.