Correlation Between Bayview Acquisition and Plum Acquisition

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

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

Diversification Opportunities for Bayview Acquisition and Plum Acquisition

-0.44

Correlation Coefficient

Bayview Acquisition  Plum Acquisition

Very good diversification

The 3 months correlation between Bayview and Plum is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bayview Acquisition Corp 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 Bayview 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 Bayview Acquisition Corp 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 Bayview Acquisition i.e., Bayview Acquisition and Plum Acquisition go up and down completely randomly.

Pair Corralation between Bayview Acquisition and Plum Acquisition

Assuming the 90 days horizon Bayview Acquisition Corp is expected to under-perform the Plum Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Bayview Acquisition Corp is 2.26 times less risky than Plum Acquisition. The stock trades about -0.1 of its potential returns per unit of risk. The Plum Acquisition Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  8.71  in Plum Acquisition Corp on September 16, 2024 and sell it today you would earn a total of  11.29  from holding Plum Acquisition Corp or generate 129.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.38%
Values	Daily Returns

Bayview Acquisition Corp  vs.  Plum Acquisition Corp

Bayview Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayview Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Plum Acquisition Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward-looking indicators, Plum Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayview Acquisition and Plum Acquisition

The main advantage of trading using opposite Bayview Acquisition and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayview Acquisition 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 Bayview Acquisition Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.