Correlation Between Plum Acquisition and Cheniere Energy

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

Diversification Opportunities for Plum Acquisition and Cheniere Energy

0.23

Correlation Coefficient

Plum Acquisition  Cheniere Energy

Modest diversification

The 3 months correlation between Plum and Cheniere is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Plum Acquisition Corp and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Plum Acquisition i.e., Plum Acquisition and Cheniere Energy go up and down completely randomly.

Pair Corralation between Plum Acquisition and Cheniere Energy

Assuming the 90 days horizon Plum Acquisition Corp is expected to generate 5.78 times more return on investment than Cheniere Energy. However, Plum Acquisition is 5.78 times more volatile than Cheniere Energy Partners. It trades about 0.22 of its potential returns per unit of risk. Cheniere Energy Partners is currently generating about -0.07 per unit of risk. If you would invest  13.00  in Plum Acquisition Corp on October 10, 2024 and sell it today you would earn a total of  5.00  from holding Plum Acquisition Corp or generate 38.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

Plum Acquisition Corp  vs.  Cheniere Energy Partners

Plum Acquisition Corp

Risk-Adjusted Performance

0 of 100

Solid

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 uncertain forward-looking indicators, Plum Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Cheniere Energy Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Plum Acquisition and Cheniere Energy

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

The idea behind Plum Acquisition Corp and Cheniere Energy Partners 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.