Can any of the company-specific risk be diversified away by investing in both Bayview Acquisition and Malaga Financial 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 Bayview Acquisition and Malaga Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayview Acquisition Corp and Malaga Financial, you can compare the effects of market volatilities on Bayview Acquisition and Malaga Financial 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 Bayview Acquisition with a short position of Malaga Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayview Acquisition and Malaga Financial.
Diversification Opportunities for Bayview Acquisition and Malaga Financial
The 3 months correlation between Bayview and Malaga is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bayview Acquisition Corp and Malaga Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malaga Financial and Bayview 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 Bayview Acquisition Corp are associated (or correlated) with Malaga Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malaga Financial has no effect on the direction of Bayview Acquisition i.e., Bayview Acquisition and Malaga Financial go up and down completely randomly.
Pair Corralation between Bayview Acquisition and Malaga Financial
Assuming the 90 days horizon Bayview Acquisition is expected to generate 2.53 times less return on investment than Malaga Financial. But when comparing it to its historical volatility, Bayview Acquisition Corp is 2.62 times less risky than Malaga Financial. It trades about 0.03 of its potential returns per unit of risk. Malaga Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,093 in Malaga Financial on March 6, 2024 and sell it today you would earn a total of 236.00 from holding Malaga Financial or generate 11.28% return on investment over 90 days.
Over the last 90 days Bayview Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bayview Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Malaga Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Malaga Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.