Correlation Between Redwoods Acquisition and Futuretech

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

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

Diversification Opportunities for Redwoods Acquisition and Futuretech

0.69

Correlation Coefficient

Redwoods Acquisition  Futuretech

Poor diversification

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

Pair Corralation between Redwoods Acquisition and Futuretech

If you would invest  1,101  in Futuretech II Acquisition on March 14, 2024 and sell it today you would earn a total of  0.00  from holding Futuretech II Acquisition or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Redwoods Acquisition Corp  vs.  Futuretech II Acquisition

Redwoods Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redwoods Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Futuretech II Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Redwoods Acquisition and Futuretech

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

The idea behind Redwoods Acquisition Corp and Futuretech II 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.