Correlation Between Victory Capital and Plum Acquisition

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

Diversification Opportunities for Victory Capital and Plum Acquisition

0.86

Correlation Coefficient

Victory Capital  Plum Acquisition

Very poor diversification

The 3 months correlation between Victory and Plum is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Victory Capital Holdings 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 Victory 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 Victory Capital Holdings 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 Victory Capital i.e., Victory Capital and Plum Acquisition go up and down completely randomly.

Pair Corralation between Victory Capital and Plum Acquisition

Given the investment horizon of 90 days Victory Capital Holdings is expected to generate 9.42 times more return on investment than Plum Acquisition. However, Victory Capital is 9.42 times more volatile than Plum Acquisition Corp. It trades about 0.14 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.13 per unit of risk. If you would invest  5,440  in Victory Capital Holdings on October 1, 2024 and sell it today you would earn a total of  1,186  from holding Victory Capital Holdings or generate 21.8% return on investment over 90 days.

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

Victory Capital Holdings  vs.  Plum Acquisition Corp

Victory Capital Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Capital Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Victory Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Plum Acquisition Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 9 (%) 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 recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Victory Capital and Plum Acquisition

The main advantage of trading using opposite Victory Capital and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victory 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 Victory Capital Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.