Correlation Between Plum Acquisition and Coliseum Acquisition
Can any of the company-specific risk be diversified away by investing in both Plum Acquisition and Coliseum Acquisition 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 Plum Acquisition and Coliseum Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plum Acquisition Corp and Coliseum Acquisition Corp, you can compare the effects of market volatilities on Plum Acquisition and Coliseum Acquisition 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 Plum Acquisition with a short position of Coliseum Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plum Acquisition and Coliseum Acquisition.
Diversification Opportunities for Plum Acquisition and Coliseum Acquisition
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Plum and Coliseum is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Plum Acquisition Corp and Coliseum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coliseum Acquisition Corp and Plum 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 Plum Acquisition Corp are associated (or correlated) with Coliseum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coliseum Acquisition Corp has no effect on the direction of Plum Acquisition i.e., Plum Acquisition and Coliseum Acquisition go up and down completely randomly.
Pair Corralation between Plum Acquisition and Coliseum Acquisition
Assuming the 90 days horizon Plum Acquisition is expected to generate 1.18 times less return on investment than Coliseum Acquisition. But when comparing it to its historical volatility, Plum Acquisition Corp is 1.18 times less risky than Coliseum Acquisition. It trades about 0.15 of its potential returns per unit of risk. Coliseum Acquisition Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3.22 in Coliseum Acquisition Corp on September 3, 2024 and sell it today you would earn a total of 7.78 from holding Coliseum Acquisition Corp or generate 241.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 63.61% |
| Values | Daily Returns |
Plum Acquisition Corp vs. Coliseum Acquisition Corp
Performance |
| Timeline |
| Plum Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
| Coliseum Acquisition Corp |
Plum Acquisition and Coliseum Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plum Acquisition and Coliseum Acquisition
The main advantage of trading using opposite Plum Acquisition and Coliseum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plum Acquisition position performs unexpectedly, Coliseum Acquisition 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 Coliseum Acquisition will offset losses from the drop in Coliseum Acquisition's long position.The idea behind Plum Acquisition Corp and Coliseum Acquisition Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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