Correlation Between Carbios and Parx Plastics

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

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

Diversification Opportunities for Carbios and Parx Plastics

-0.92

Correlation Coefficient

Carbios  Parx Plastics

Pay attention - limited upside

The 3 months correlation between Carbios and Parx is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Carbios and Parx Plastics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parx Plastics NV and Carbios 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 Carbios are associated (or correlated) with Parx Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parx Plastics NV has no effect on the direction of Carbios i.e., Carbios and Parx Plastics go up and down completely randomly.

Pair Corralation between Carbios and Parx Plastics

Assuming the 90 days trading horizon Carbios is expected to generate 8.4 times more return on investment than Parx Plastics. However, Carbios is 8.4 times more volatile than Parx Plastics NV. It trades about 0.02 of its potential returns per unit of risk. Parx Plastics NV is currently generating about -0.22 per unit of risk. If you would invest  761.00  in Carbios on September 24, 2024 and sell it today you would lose (73.00) from holding Carbios or give up 9.59% of portfolio value over 90 days.

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

Carbios  vs.  Parx Plastics NV

Carbios

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carbios has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Parx Plastics NV

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Parx Plastics NV are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Parx Plastics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carbios and Parx Plastics

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

The idea behind Carbios and Parx Plastics NV 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.