Correlation Between Willow Lane and FG Merger

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

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

Diversification Opportunities for Willow Lane and FG Merger

0.94

Correlation Coefficient

Willow Lane  FG Merger

Almost no diversification

The 3 months correlation between Willow and FGMC is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Willow Lane Acquisition and FG Merger II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FG Merger II and Willow Lane 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 Willow Lane Acquisition are associated (or correlated) with FG Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FG Merger II has no effect on the direction of Willow Lane i.e., Willow Lane and FG Merger go up and down completely randomly.

Pair Corralation between Willow Lane and FG Merger

Given the investment horizon of 90 days Willow Lane Acquisition is expected to generate 0.65 times more return on investment than FG Merger. However, Willow Lane Acquisition is 1.55 times less risky than FG Merger. It trades about 0.38 of its potential returns per unit of risk. FG Merger II is currently generating about 0.23 per unit of risk. If you would invest  1,006  in Willow Lane Acquisition on May 5, 2025 and sell it today you would earn a total of  27.00  from holding Willow Lane Acquisition or generate 2.68% return on investment over 90 days.

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

Willow Lane Acquisition  vs.  FG Merger II

Willow Lane Acquisition

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Willow Lane Acquisition are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Willow Lane is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FG Merger II

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FG Merger II are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, FG Merger is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Willow Lane and FG Merger

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

The idea behind Willow Lane Acquisition and FG Merger 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.