Correlation Between Embrace Change and Continental Beverage

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

By analyzing existing cross correlation between Embrace Change Acquisition and Continental Beverage Brands, you can compare the effects of market volatilities on Embrace Change and Continental Beverage 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 Embrace Change with a short position of Continental Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embrace Change and Continental Beverage.

Diversification Opportunities for Embrace Change and Continental Beverage

-0.24

Correlation Coefficient

Embrace Change  Continental Beverage

Very good diversification

The 3 months correlation between Embrace and Continental is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and Continental Beverage Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Beverage and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with Continental Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Beverage has no effect on the direction of Embrace Change i.e., Embrace Change and Continental Beverage go up and down completely randomly.

Pair Corralation between Embrace Change and Continental Beverage

Given the investment horizon of 90 days Embrace Change is expected to generate 2076.45 times less return on investment than Continental Beverage. But when comparing it to its historical volatility, Embrace Change Acquisition is 840.71 times less risky than Continental Beverage. It trades about 0.08 of its potential returns per unit of risk. Continental Beverage Brands is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Continental Beverage Brands on September 3, 2024 and sell it today you would earn a total of  57.00  from holding Continental Beverage Brands or generate 316.67% return on investment over 90 days.

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

Embrace Change Acquisition  vs.  Continental Beverage Brands

Embrace Change Acqui

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Embrace Change is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Continental Beverage

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Beverage Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Continental Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embrace Change and Continental Beverage

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

The idea behind Embrace Change Acquisition and Continental Beverage Brands 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.