Correlation Between Mizuho Financial and Plum Acquisition

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

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

Diversification Opportunities for Mizuho Financial and Plum Acquisition

-0.38

Correlation Coefficient

Mizuho Financial  Plum Acquisition

Very good diversification

The 3 months correlation between Mizuho and Plum is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mizuho Financial 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 Mizuho Financial 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 Mizuho Financial 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 Mizuho Financial i.e., Mizuho Financial and Plum Acquisition go up and down completely randomly.

Pair Corralation between Mizuho Financial and Plum Acquisition

Assuming the 90 days horizon Mizuho Financial is expected to generate 90.2 times less return on investment than Plum Acquisition. But when comparing it to its historical volatility, Mizuho Financial Group is 49.12 times less risky than Plum Acquisition. It trades about 0.08 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3.15  in Plum Acquisition Corp on September 17, 2024 and sell it today you would earn a total of  21.85  from holding Plum Acquisition Corp or generate 693.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.31%
Values	Daily Returns

Mizuho Financial Group  vs.  Plum Acquisition Corp

Mizuho Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mizuho Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Mizuho Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Plum Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plum Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Plum Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Mizuho Financial and Plum Acquisition

The main advantage of trading using opposite Mizuho Financial and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mizuho Financial 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 Mizuho Financial 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.