Correlation Between Arena Fortify and M3 Brigade

Can any of the company-specific risk be diversified away by investing in both Arena Fortify and M3 Brigade 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 Arena Fortify and M3 Brigade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arena Fortify Acquisition and M3 Brigade Acquisition II, you can compare the effects of market volatilities on Arena Fortify and M3 Brigade 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 Arena Fortify with a short position of M3 Brigade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arena Fortify and M3 Brigade.

Diversification Opportunities for Arena Fortify and M3 Brigade

0.68

Correlation Coefficient

Arena Fortify  M3 Brigade

Poor diversification

The 3 months correlation between Arena and MBAC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Arena Fortify Acquisition and M3 Brigade Acquisition II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Brigade Acquisition and Arena Fortify 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 Arena Fortify Acquisition are associated (or correlated) with M3 Brigade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Brigade Acquisition has no effect on the direction of Arena Fortify i.e., Arena Fortify and M3 Brigade go up and down completely randomly.

Pair Corralation between Arena Fortify and M3 Brigade

Given the investment horizon of 90 days Arena Fortify Acquisition is expected to generate about the same return on investment as M3 Brigade Acquisition II. But, Arena Fortify Acquisition is 1.3 times less risky than M3 Brigade. It trades about 0.14 of its potential returns per unit of risk. M3 Brigade Acquisition II is currently generating about 0.11 per unit of risk. If you would invest  980.00  in M3 Brigade Acquisition II on January 19, 2024 and sell it today you would earn a total of  79.00  from holding M3 Brigade Acquisition II or generate 8.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	29.19%
Values	Daily Returns

Arena Fortify Acquisition  vs.  M3 Brigade Acquisition II

Arena Fortify Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arena Fortify Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arena Fortify is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

M3 Brigade Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M3 Brigade Acquisition II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, M3 Brigade is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arena Fortify and M3 Brigade

The main advantage of trading using opposite Arena Fortify and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arena Fortify position performs unexpectedly, M3 Brigade 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 M3 Brigade will offset losses from the drop in M3 Brigade's long position.

The idea behind Arena Fortify Acquisition and M3 Brigade Acquisition II 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.