Correlation Between Plume and REDLANG

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

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

Diversification Opportunities for Plume and REDLANG

-0.18

Correlation Coefficient

Plume  REDLANG

Good diversification

The 3 months correlation between Plume and REDLANG is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Plume and REDLANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDLANG 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 REDLANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDLANG has no effect on the direction of Plume i.e., Plume and REDLANG go up and down completely randomly.

Pair Corralation between Plume and REDLANG

Assuming the 90 days trading horizon Plume is expected to generate 0.96 times more return on investment than REDLANG. However, Plume is 1.04 times less risky than REDLANG. It trades about -0.11 of its potential returns per unit of risk. REDLANG is currently generating about -0.13 per unit of risk. If you would invest  19.00  in Plume on January 18, 2025 and sell it today you would lose (3.00) from holding Plume or give up 15.79% of portfolio value over 90 days.

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

Plume  vs.  REDLANG

Plume

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plume are ranked lower than 13 (%) 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.

REDLANG

Risk-Adjusted Performance

Very Weak

Over the last 90 days REDLANG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Crypto's essential indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for REDLANG stockholders.

Pair Trading with Plume and REDLANG

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

The idea behind Plume and REDLANG 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.