Correlation Between Universal and Plum Acquisition

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

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

Diversification Opportunities for Universal and Plum Acquisition

0.34

Correlation Coefficient

Universal  Plum Acquisition

Weak diversification

The 3 months correlation between Universal and Plum is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Universal 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 Universal 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 Universal 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 Universal i.e., Universal and Plum Acquisition go up and down completely randomly.

Pair Corralation between Universal and Plum Acquisition

Considering the 90-day investment horizon Universal is expected to generate 139.31 times less return on investment than Plum Acquisition. But when comparing it to its historical volatility, Universal is 43.62 times less risky than Plum Acquisition. It trades about 0.03 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Plum Acquisition Corp on October 1, 2024 and sell it today you would earn a total of  10.00  from holding Plum Acquisition Corp or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	54.11%
Values	Daily Returns

Universal  vs.  Plum Acquisition Corp

Universal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Plum Acquisition Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward-looking indicators, Plum Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal and Plum Acquisition

The main advantage of trading using opposite Universal and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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 Universal 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.