Correlation Between Plum Acquisition and Radcom

Can any of the company-specific risk be diversified away by investing in both Plum Acquisition and Radcom 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 Radcom 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 Radcom, you can compare the effects of market volatilities on Plum Acquisition and Radcom 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 Radcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plum Acquisition and Radcom.

Diversification Opportunities for Plum Acquisition and Radcom

-0.35

Correlation Coefficient

Plum Acquisition  Radcom

Very good diversification

The 3 months correlation between Plum and Radcom is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Plum Acquisition Corp and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Plum Acquisition i.e., Plum Acquisition and Radcom go up and down completely randomly.

Pair Corralation between Plum Acquisition and Radcom

Assuming the 90 days horizon Plum Acquisition is expected to generate 19.75 times less return on investment than Radcom. But when comparing it to its historical volatility, Plum Acquisition Corp is 29.51 times less risky than Radcom. It trades about 0.15 of its potential returns per unit of risk. Radcom is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,067  in Radcom on October 6, 2024 and sell it today you would earn a total of  148.00  from holding Radcom or generate 13.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Plum Acquisition Corp  vs.  Radcom

Plum Acquisition Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 10 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Radcom

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plum Acquisition and Radcom

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

The idea behind Plum Acquisition Corp and Radcom 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.