Correlation Between Plume and SC

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

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

Diversification Opportunities for Plume and SC

-0.16

Correlation Coefficient

Plume  SC

Good diversification

The 3 months correlation between Plume and SC is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Plume and SC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SC 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 SC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SC has no effect on the direction of Plume i.e., Plume and SC go up and down completely randomly.

Pair Corralation between Plume and SC

Assuming the 90 days trading horizon Plume is expected to generate 39.46 times more return on investment than SC. However, Plume is 39.46 times more volatile than SC. It trades about 0.17 of its potential returns per unit of risk. SC is currently generating about -0.1 per unit of risk. If you would invest  0.00  in Plume on January 23, 2025 and sell it today you would earn a total of  18.00  from holding Plume or generate 9.223372036854776E16% return on investment over 90 days.

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

Plume  vs.  SC

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 weak fundamental indicators, Plume exhibited solid returns over the last few months and may actually be approaching a breakup point.

SC

Risk-Adjusted Performance

Very Weak

Over the last 90 days SC 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 May 2025. The latest tumult may also be a sign of longer-term up-swing for SC shareholders.

Pair Trading with Plume and SC

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

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