Correlation Between Plum Acquisition and Brookfield Corp

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

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

Diversification Opportunities for Plum Acquisition and Brookfield Corp

0.88

Correlation Coefficient

Plum Acquisition  Brookfield Corp

Very poor diversification

The 3 months correlation between Plum and Brookfield is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Plum Acquisition Corp and Brookfield Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Corp and Plum Acquisition 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 Plum Acquisition Corp are associated (or correlated) with Brookfield Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Corp has no effect on the direction of Plum Acquisition i.e., Plum Acquisition and Brookfield Corp go up and down completely randomly.

Pair Corralation between Plum Acquisition and Brookfield Corp

Given the investment horizon of 90 days Plum Acquisition is expected to generate 10.07 times less return on investment than Brookfield Corp. But when comparing it to its historical volatility, Plum Acquisition Corp is 4.23 times less risky than Brookfield Corp. It trades about 0.08 of its potential returns per unit of risk. Brookfield Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,611  in Brookfield Corp on September 17, 2024 and sell it today you would earn a total of  257.00  from holding Brookfield Corp or generate 4.58% return on investment over 90 days.

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

Plum Acquisition Corp  vs.  Brookfield Corp

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 steady primary indicators, Plum Acquisition is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Brookfield Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Brookfield Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plum Acquisition and Brookfield Corp

The main advantage of trading using opposite Plum Acquisition and Brookfield Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plum Acquisition position performs unexpectedly, Brookfield Corp 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 Brookfield Corp will offset losses from the drop in Brookfield Corp's long position.

The idea behind Plum Acquisition Corp and Brookfield 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.