Correlation Between CO2 Energy and Plum Acquisition

Can any of the company-specific risk be diversified away by investing in both CO2 Energy 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 CO2 Energy and Plum Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CO2 Energy Transition and Plum Acquisition Corp, you can compare the effects of market volatilities on CO2 Energy 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 CO2 Energy with a short position of Plum Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of CO2 Energy and Plum Acquisition.

Diversification Opportunities for CO2 Energy and Plum Acquisition

0.13

Correlation Coefficient

CO2 Energy  Plum Acquisition

Average diversification

The 3 months correlation between CO2 and Plum is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CO2 Energy Transition 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 CO2 Energy 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 CO2 Energy Transition 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 CO2 Energy i.e., CO2 Energy and Plum Acquisition go up and down completely randomly.

Pair Corralation between CO2 Energy and Plum Acquisition

Assuming the 90 days horizon CO2 Energy Transition is expected to generate 0.05 times more return on investment than Plum Acquisition. However, CO2 Energy Transition is 19.01 times less risky than Plum Acquisition. It trades about 0.03 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about -0.08 per unit of risk. If you would invest  1,003  in CO2 Energy Transition on December 26, 2024 and sell it today you would earn a total of  12.00  from holding CO2 Energy Transition or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	21.67%
Values	Daily Returns

CO2 Energy Transition  vs.  Plum Acquisition Corp

CO2 Energy Transition

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CO2 Energy Transition are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, CO2 Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of inconsistent performance in the last few months, the Stock's forward-looking indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with CO2 Energy and Plum Acquisition

The main advantage of trading using opposite CO2 Energy and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CO2 Energy 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 CO2 Energy Transition 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.