Correlation Between Mountain Crest and Alumina

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

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

Diversification Opportunities for Mountain Crest and Alumina

-0.69

Correlation Coefficient

Mountain Crest  Alumina

Excellent diversification

The 3 months correlation between Mountain and Alumina is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Crest Acquisition and Alumina Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited and Mountain Crest 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 Crest Acquisition are associated (or correlated) with Alumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited has no effect on the direction of Mountain Crest i.e., Mountain Crest and Alumina go up and down completely randomly.

Pair Corralation between Mountain Crest and Alumina

Assuming the 90 days horizon Mountain Crest Acquisition is expected to under-perform the Alumina. In addition to that, Mountain Crest is 2.35 times more volatile than Alumina Limited. It trades about -0.09 of its total potential returns per unit of risk. Alumina Limited is currently generating about 0.02 per unit of volatility. If you would invest  110.00  in Alumina Limited on February 26, 2024 and sell it today you would earn a total of  10.00  from holding Alumina Limited or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	39.69%
Values	Daily Returns

Mountain Crest Acquisition  vs.  Alumina Limited

Mountain Crest Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mountain Crest Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Mountain Crest is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Alumina Limited

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alumina Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Alumina reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mountain Crest and Alumina

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

The idea behind Mountain Crest Acquisition and Alumina Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.