Correlation Between Vine Hill and AA Mission

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

By analyzing existing cross correlation between Vine Hill Capital and AA Mission Acquisition, you can compare the effects of market volatilities on Vine Hill and AA Mission 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 Vine Hill with a short position of AA Mission. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vine Hill and AA Mission.

Diversification Opportunities for Vine Hill and AA Mission

-0.29

Correlation Coefficient

Vine Hill  AA Mission

Very good diversification

The 3 months correlation between Vine and AAM is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vine Hill Capital and AA Mission Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AA Mission Acquisition and Vine Hill 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 Vine Hill Capital are associated (or correlated) with AA Mission. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AA Mission Acquisition has no effect on the direction of Vine Hill i.e., Vine Hill and AA Mission go up and down completely randomly.

Pair Corralation between Vine Hill and AA Mission

Given the investment horizon of 90 days Vine Hill Capital is expected to generate 0.99 times more return on investment than AA Mission. However, Vine Hill Capital is 1.01 times less risky than AA Mission. It trades about 0.19 of its potential returns per unit of risk. AA Mission Acquisition is currently generating about 0.17 per unit of risk. If you would invest  996.00  in Vine Hill Capital on September 30, 2024 and sell it today you would earn a total of  7.00  from holding Vine Hill Capital or generate 0.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.46%
Values	Daily Returns

Vine Hill Capital  vs.  AA Mission Acquisition

Vine Hill Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vine Hill Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Vine Hill is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

AA Mission Acquisition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AA Mission Acquisition are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AA Mission is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vine Hill and AA Mission

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

The idea behind Vine Hill Capital and AA Mission 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.