Correlation Between NVIDIA and Plum Acquisition

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

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

Diversification Opportunities for NVIDIA and Plum Acquisition

0.09

Correlation Coefficient

NVIDIA  Plum Acquisition

Significant diversification

The 3 months correlation between NVIDIA and Plum is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA 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 NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Plum Acquisition go up and down completely randomly.

Pair Corralation between NVIDIA and Plum Acquisition

Given the investment horizon of 90 days NVIDIA is expected to generate 3.18 times more return on investment than Plum Acquisition. However, NVIDIA is 3.18 times more volatile than Plum Acquisition Corp. It trades about 0.13 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.02 per unit of risk. If you would invest  4,516  in NVIDIA on October 4, 2024 and sell it today you would earn a total of  9,315  from holding NVIDIA or generate 206.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	64.95%
Values	Daily Returns

NVIDIA  vs.  Plum Acquisition Corp

NVIDIA

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Plum Acquisition Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, Plum Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NVIDIA and Plum Acquisition

The main advantage of trading using opposite NVIDIA and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.