Can any of the company-specific risk be diversified away by investing in both M3 Brigade and Aditxt 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 M3 Brigade and Aditxt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M3 Brigade Acquisition II and Aditxt Inc, you can compare the effects of market volatilities on M3 Brigade and Aditxt 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 M3 Brigade with a short position of Aditxt. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 Brigade and Aditxt.
Diversification Opportunities for M3 Brigade and Aditxt
The 3 months correlation between MBAC and Aditxt is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding M3-Brigade Acquisition II and Aditxt Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aditxt Inc and M3 Brigade 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 M3 Brigade Acquisition II are associated (or correlated) with Aditxt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aditxt Inc has no effect on the direction of M3 Brigade i.e., M3 Brigade and Aditxt go up and down completely randomly.
Given the investment horizon of 90 days M3 Brigade Acquisition II is expected to generate 0.01 times more return on investment than Aditxt. However, M3 Brigade Acquisition II is 75.18 times less risky than Aditxt. It trades about 0.1 of its potential returns per unit of risk. Aditxt Inc is currently generating about -0.38 per unit of risk. If you would invest 1,044 in M3 Brigade Acquisition II on August 30, 2023 and sell it today you would earn a total of 2.00 from holding M3 Brigade Acquisition II or generate 0.19% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition II are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, M3 Brigade is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Aditxt Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aditxt showed solid returns over the last few months and may actually be approaching a breakup point.
The main advantage of trading using opposite M3 Brigade and Aditxt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 Brigade position performs unexpectedly, Aditxt 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 Aditxt will offset losses from the drop in Aditxt's long position.
The idea behind M3 Brigade Acquisition II and Aditxt Inc 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 CEO Directory module to screen CEOs from public companies around the world.
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