Correlation Between Kernel Group and Plum Acquisition

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

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

Diversification Opportunities for Kernel Group and Plum Acquisition

-0.07

Correlation Coefficient

Kernel Group  Plum Acquisition

Good diversification

The 3 months correlation between Kernel and Plum is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kernel Group Holdings and Plum Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition I and Kernel Group 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 Kernel Group Holdings 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 I has no effect on the direction of Kernel Group i.e., Kernel Group and Plum Acquisition go up and down completely randomly.

Pair Corralation between Kernel Group and Plum Acquisition

Assuming the 90 days horizon Kernel Group Holdings is expected to generate 0.72 times more return on investment than Plum Acquisition. However, Kernel Group Holdings is 1.39 times less risky than Plum Acquisition. It trades about 0.01 of its potential returns per unit of risk. Plum Acquisition I is currently generating about 0.0 per unit of risk. If you would invest  1,093  in Kernel Group Holdings on September 20, 2024 and sell it today you would lose (35.00) from holding Kernel Group Holdings or give up 3.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.7%
Values	Daily Returns

Kernel Group Holdings  vs.  Plum Acquisition I

Kernel Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kernel Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kernel Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Plum Acquisition I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plum Acquisition I has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Plum Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kernel Group and Plum Acquisition

The main advantage of trading using opposite Kernel Group and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kernel Group 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 Kernel Group Holdings and Plum Acquisition I 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.