Correlation Between Mountain and Focus Impact

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

By analyzing existing cross correlation between Mountain Co I and Focus Impact Acquisition, you can compare the effects of market volatilities on Mountain and Focus Impact 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 Mountain with a short position of Focus Impact. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mountain and Focus Impact.

Diversification Opportunities for Mountain and Focus Impact

0.23

Correlation Coefficient

Mountain  Focus Impact

Modest diversification

The 3 months correlation between Mountain and Focus is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Co I and Focus Impact Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Impact Acquisition and Mountain 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 Mountain Co I are associated (or correlated) with Focus Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Impact Acquisition has no effect on the direction of Mountain i.e., Mountain and Focus Impact go up and down completely randomly.

Pair Corralation between Mountain and Focus Impact

Assuming the 90 days horizon Mountain Co I is expected to generate 0.81 times more return on investment than Focus Impact. However, Mountain Co I is 1.23 times less risky than Focus Impact. It trades about 0.02 of its potential returns per unit of risk. Focus Impact Acquisition is currently generating about -0.23 per unit of risk. If you would invest  1.24  in Mountain Co I on September 16, 2024 and sell it today you would lose (0.20) from holding Mountain Co I or give up 16.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.22%
Values	Daily Returns

Mountain Co I  vs.  Focus Impact Acquisition

Mountain Co I

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Mountain Co I has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Mountain showed solid returns over the last few months and may actually be approaching a breakup point.

Focus Impact Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Impact Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Mountain and Focus Impact

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

The idea behind Mountain Co I and Focus Impact 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.