Correlation Between HHG Capital and Plum Acquisition

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

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

Diversification Opportunities for HHG Capital and Plum Acquisition

-0.73

Correlation Coefficient

HHG Capital  Plum Acquisition

Pay attention - limited upside

The 3 months correlation between HHG and Plum is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding HHG Capital Corp 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 HHG Capital 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 HHG Capital Corp 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 HHG Capital i.e., HHG Capital and Plum Acquisition go up and down completely randomly.

Pair Corralation between HHG Capital and Plum Acquisition

Given the investment horizon of 90 days HHG Capital Corp is expected to under-perform the Plum Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, HHG Capital Corp is 17.18 times less risky than Plum Acquisition. The stock trades about -0.37 of its potential returns per unit of risk. The Plum Acquisition Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  6.15  in Plum Acquisition Corp on September 22, 2024 and sell it today you would earn a total of  13.85  from holding Plum Acquisition Corp or generate 225.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	36.36%
Values	Daily Returns

HHG Capital Corp  vs.  Plum Acquisition Corp

HHG Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HHG Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Plum Acquisition Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Plum Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HHG Capital and Plum Acquisition

The main advantage of trading using opposite HHG Capital and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HHG Capital 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 HHG Capital Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.