Correlation Between Compagnie Plastic and Motorcar Parts

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

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

Diversification Opportunities for Compagnie Plastic and Motorcar Parts

0.36

Correlation Coefficient

Compagnie Plastic  Motorcar Parts

Weak diversification

The 3 months correlation between Compagnie and Motorcar is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Plastic Omnium and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts and Compagnie Plastic 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 Compagnie Plastic Omnium are associated (or correlated) with Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of Compagnie Plastic i.e., Compagnie Plastic and Motorcar Parts go up and down completely randomly.

Pair Corralation between Compagnie Plastic and Motorcar Parts

Assuming the 90 days horizon Compagnie Plastic is expected to generate 4.35 times less return on investment than Motorcar Parts. But when comparing it to its historical volatility, Compagnie Plastic Omnium is 1.43 times less risky than Motorcar Parts. It trades about 0.04 of its potential returns per unit of risk. Motorcar Parts of is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  585.00  in Motorcar Parts of on September 28, 2024 and sell it today you would earn a total of  165.00  from holding Motorcar Parts of or generate 28.21% return on investment over 90 days.

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

Compagnie Plastic Omnium  vs.  Motorcar Parts of

Compagnie Plastic Omnium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Compagnie Plastic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Motorcar Parts

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Motorcar Parts reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Plastic and Motorcar Parts

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

The idea behind Compagnie Plastic Omnium and Motorcar Parts of 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.