Correlation Between Plum Acquisition and Tastemaker Acquisition

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

Diversification Opportunities for Plum Acquisition and Tastemaker Acquisition

0.47

Correlation Coefficient

Plum Acquisition  Tastemaker Acquisition

Very weak diversification

The 3 months correlation between Plum and Tastemaker is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Plum Acquisition Corp and Tastemaker Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tastemaker Acquisition 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 Tastemaker Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tastemaker Acquisition has no effect on the direction of Plum Acquisition i.e., Plum Acquisition and Tastemaker Acquisition go up and down completely randomly.

Pair Corralation between Plum Acquisition and Tastemaker Acquisition

If you would invest  18.00  in Plum Acquisition Corp on September 14, 2024 and sell it today you would earn a total of  7.00  from holding Plum Acquisition Corp or generate 38.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	33.33%
Values	Daily Returns

Plum Acquisition Corp  vs.  Tastemaker Acquisition Corp

Plum Acquisition Corp

Risk-Adjusted Performance

0 of 100

Excellent

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

Tastemaker Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tastemaker Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tastemaker Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Plum Acquisition and Tastemaker Acquisition

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

The idea behind Plum Acquisition Corp and Tastemaker 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.