Correlation Between Associated Capital and Plum Acquisition

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

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

Diversification Opportunities for Associated Capital and Plum Acquisition

-0.11

Correlation Coefficient

Associated Capital  Plum Acquisition

Good diversification

The 3 months correlation between Associated and Plum is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group 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 Associated Capital 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 Associated Capital Group 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 Associated Capital i.e., Associated Capital and Plum Acquisition go up and down completely randomly.

Pair Corralation between Associated Capital and Plum Acquisition

Allowing for the 90-day total investment horizon Associated Capital Group is expected to generate 1.13 times more return on investment than Plum Acquisition. However, Associated Capital is 1.13 times more volatile than Plum Acquisition Corp. It trades about 0.03 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about -0.01 per unit of risk. If you would invest  3,617  in Associated Capital Group on December 5, 2024 and sell it today you would earn a total of  79.00  from holding Associated Capital Group or generate 2.18% return on investment over 90 days.

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

Associated Capital Group  vs.  Plum Acquisition Corp

Associated Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Associated Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Plum Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plum Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady primary indicators, Plum Acquisition is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Associated Capital and Plum Acquisition

The main advantage of trading using opposite Associated Capital and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Capital 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 Associated Capital Group 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.