Correlation Between Croda International and Mondi PLC

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

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

Diversification Opportunities for Croda International and Mondi PLC

0.9

Correlation Coefficient

Croda International  Mondi PLC

Almost no diversification

The 3 months correlation between Croda and Mondi is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Croda International PLC and Mondi PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondi PLC ADR and Croda International 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 Croda International PLC are associated (or correlated) with Mondi PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondi PLC ADR has no effect on the direction of Croda International i.e., Croda International and Mondi PLC go up and down completely randomly.

Pair Corralation between Croda International and Mondi PLC

Assuming the 90 days horizon Croda International PLC is expected to under-perform the Mondi PLC. In addition to that, Croda International is 1.22 times more volatile than Mondi PLC ADR. It trades about -0.24 of its total potential returns per unit of risk. Mondi PLC ADR is currently generating about -0.14 per unit of volatility. If you would invest  3,204  in Mondi PLC ADR on September 4, 2024 and sell it today you would lose (173.00) from holding Mondi PLC ADR or give up 5.4% of portfolio value over 90 days.

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

Croda International PLC  vs.  Mondi PLC ADR

Croda International PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Croda International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Mondi PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondi PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Croda International and Mondi PLC

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

The idea behind Croda International PLC and Mondi PLC ADR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.