Correlation Between Sea and Plum Acquisition

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

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

Diversification Opportunities for Sea and Plum Acquisition

0.75

Correlation Coefficient

Sea  Plum Acquisition

Poor diversification

The 3 months correlation between Sea and Plum is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sea 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 Sea 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 Sea 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 Sea i.e., Sea and Plum Acquisition go up and down completely randomly.

Pair Corralation between Sea and Plum Acquisition

Allowing for the 90-day total investment horizon Sea is expected to under-perform the Plum Acquisition. In addition to that, Sea is 7.65 times more volatile than Plum Acquisition Corp. It trades about -0.14 of its total potential returns per unit of risk. Plum Acquisition Corp is currently generating about -0.12 per unit of volatility. If you would invest  1,118  in Plum Acquisition Corp on October 9, 2024 and sell it today you would lose (6.00) from holding Plum Acquisition Corp or give up 0.54% of portfolio value over 90 days.

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

Sea  vs.  Plum Acquisition Corp

Sea

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Plum Acquisition Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 7 (%) 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.

Pair Trading with Sea and Plum Acquisition

The main advantage of trading using opposite Sea and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.