Correlation Between GSR II and Armada Acquisition

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

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

Diversification Opportunities for GSR II and Armada Acquisition

0.23

Correlation Coefficient

GSR II  Armada Acquisition

Modest diversification

The 3 months correlation between GSR and Armada is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding GSR II Meteora 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 GSR II 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 GSR II Meteora 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 GSR II i.e., GSR II and Armada Acquisition go up and down completely randomly.

Pair Corralation between GSR II and Armada Acquisition

Assuming the 90 days horizon GSR II Meteora is expected to under-perform the Armada Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, GSR II Meteora is 1.09 times less risky than Armada Acquisition. The stock trades about -0.12 of its potential returns per unit of risk. The Armada Acquisition Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  995.00  in Armada Acquisition Corp on September 2, 2024 and sell it today you would lose (995.00) from holding Armada Acquisition Corp or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	32.55%
Values	Daily Returns

GSR II Meteora  vs.  Armada Acquisition Corp

GSR II Meteora

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GSR II and Armada Acquisition

The main advantage of trading using opposite GSR II and Armada Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSR II 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 GSR II Meteora 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.