Correlation Between Transocean and Plum Acquisition

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

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

Diversification Opportunities for Transocean and Plum Acquisition

-0.66

Correlation Coefficient

Transocean  Plum Acquisition

Excellent diversification

The 3 months correlation between Transocean and Plum is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Transocean 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 Transocean 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 Transocean 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 Transocean i.e., Transocean and Plum Acquisition go up and down completely randomly.

Pair Corralation between Transocean and Plum Acquisition

Considering the 90-day investment horizon Transocean is expected to under-perform the Plum Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Transocean is 1.03 times less risky than Plum Acquisition. The stock trades about -0.02 of its potential returns per unit of risk. The Plum Acquisition Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Plum Acquisition Corp on December 22, 2024 and sell it today you would lose (37.00) from holding Plum Acquisition Corp or give up 3.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	50.0%
Values	Daily Returns

Transocean  vs.  Plum Acquisition Corp

Transocean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Transocean is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 comparatively stable forward-looking indicators, Plum Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Transocean and Plum Acquisition

The main advantage of trading using opposite Transocean and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transocean 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 Transocean 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.