Correlation Between CF Acquisition and LAVA Medtech

Can any of the company-specific risk be diversified away by investing in both CF Acquisition and LAVA Medtech 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 LAVA Medtech 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 LAVA Medtech Acquisition, you can compare the effects of market volatilities on CF Acquisition and LAVA Medtech 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 LAVA Medtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Acquisition and LAVA Medtech.

Diversification Opportunities for CF Acquisition and LAVA Medtech

0.64

Correlation Coefficient

CF Acquisition  LAVA Medtech

Poor diversification

The 3 months correlation between CFFS and LAVA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CF Acquisition VII and LAVA Medtech Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAVA Medtech Acquisition 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 LAVA Medtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAVA Medtech Acquisition has no effect on the direction of CF Acquisition i.e., CF Acquisition and LAVA Medtech go up and down completely randomly.

Pair Corralation between CF Acquisition and LAVA Medtech

Given the investment horizon of 90 days CF Acquisition is expected to generate 1.23 times less return on investment than LAVA Medtech. In addition to that, CF Acquisition is 1.53 times more volatile than LAVA Medtech Acquisition. It trades about 0.09 of its total potential returns per unit of risk. LAVA Medtech Acquisition is currently generating about 0.18 per unit of volatility. If you would invest  1,016  in LAVA Medtech Acquisition on September 2, 2024 and sell it today you would earn a total of  28.00  from holding LAVA Medtech Acquisition or generate 2.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	21.37%
Values	Daily Returns

CF Acquisition VII  vs.  LAVA Medtech Acquisition

CF Acquisition VII

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CF Acquisition VII are ranked lower than 9 (%) 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.

LAVA Medtech Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CF Acquisition and LAVA Medtech

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

The idea behind CF Acquisition VII and LAVA Medtech 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.