Correlation Between Plume and DATA

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

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

Diversification Opportunities for Plume and DATA

-0.2

Correlation Coefficient

Plume  DATA

Good diversification

The 3 months correlation between Plume and DATA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Plume and DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATA and Plume 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 Plume are associated (or correlated) with DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATA has no effect on the direction of Plume i.e., Plume and DATA go up and down completely randomly.

Pair Corralation between Plume and DATA

Assuming the 90 days trading horizon Plume is expected to generate 1.61 times less return on investment than DATA. But when comparing it to its historical volatility, Plume is 1.49 times less risky than DATA. It trades about 0.21 of its potential returns per unit of risk. DATA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1.52  in DATA on February 9, 2025 and sell it today you would earn a total of  0.46  from holding DATA or generate 30.26% return on investment over 90 days.

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

Plume  vs.  DATA

Plume

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plume are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Plume exhibited solid returns over the last few months and may actually be approaching a breakup point.

DATA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Plume and DATA

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

The idea behind Plume and DATA 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 Global Correlations module to find global opportunities by holding instruments from different markets.