Correlation Between Twelve Seas and Plum Acquisition
Can any of the company-specific risk be diversified away by investing in both Twelve Seas and Plum 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 Twelve Seas and Plum Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Twelve Seas Investment and Plum Acquisition Corp, you can compare the effects of market volatilities on Twelve Seas and Plum 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 Twelve Seas with a short position of Plum Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Twelve Seas and Plum Acquisition.
Diversification Opportunities for Twelve Seas and Plum Acquisition
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Twelve and Plum is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Twelve Seas Investment and Plum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition Corp and Twelve Seas 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 Twelve Seas Investment are associated (or correlated) with Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition Corp has no effect on the direction of Twelve Seas i.e., Twelve Seas and Plum Acquisition go up and down completely randomly.
Pair Corralation between Twelve Seas and Plum Acquisition
Assuming the 90 days horizon Twelve Seas is expected to generate 2.46 times less return on investment than Plum Acquisition. But when comparing it to its historical volatility, Twelve Seas Investment is 2.59 times less risky than Plum Acquisition. It trades about 0.15 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4.37 in Plum Acquisition Corp on September 3, 2024 and sell it today you would earn a total of 20.63 from holding Plum Acquisition Corp or generate 472.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 29.36% |
| Values | Daily Returns |
Twelve Seas Investment vs. Plum Acquisition Corp
Performance |
| Timeline |
| Twelve Seas Investment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Plum Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
Twelve Seas and Plum Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Twelve Seas and Plum Acquisition
The main advantage of trading using opposite Twelve Seas and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twelve Seas position performs unexpectedly, Plum 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 Plum Acquisition will offset losses from the drop in Plum Acquisition's long position.The idea behind Twelve Seas Investment and Plum 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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