Correlation Between Carlyle and Plum Acquisition

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

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

Diversification Opportunities for Carlyle and Plum Acquisition

0.55

Correlation Coefficient

Carlyle  Plum Acquisition

Very weak diversification

The 3 months correlation between Carlyle and Plum is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle 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 Carlyle 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 Carlyle 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 Carlyle i.e., Carlyle and Plum Acquisition go up and down completely randomly.

Pair Corralation between Carlyle and Plum Acquisition

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 2.34 times more return on investment than Plum Acquisition. However, Carlyle is 2.34 times more volatile than Plum Acquisition Corp. It trades about 0.09 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.14 per unit of risk. If you would invest  4,940  in Carlyle Group on October 22, 2024 and sell it today you would earn a total of  584.00  from holding Carlyle Group or generate 11.82% return on investment over 90 days.

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

Carlyle Group  vs.  Plum Acquisition Corp

Carlyle Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Plum Acquisition Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Plum Acquisition may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Carlyle and Plum Acquisition

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

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.