Correlation Between Commercial Vehicle and Plastic Omnium

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

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

Diversification Opportunities for Commercial Vehicle and Plastic Omnium

-0.29

Correlation Coefficient

Commercial Vehicle  Plastic Omnium

Very good diversification

The 3 months correlation between Commercial and Plastic is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Vehicle Group and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium and Commercial Vehicle 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 Commercial Vehicle Group are associated (or correlated) with Plastic Omnium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastic Omnium has no effect on the direction of Commercial Vehicle i.e., Commercial Vehicle and Plastic Omnium go up and down completely randomly.

Pair Corralation between Commercial Vehicle and Plastic Omnium

Assuming the 90 days trading horizon Commercial Vehicle Group is expected to under-perform the Plastic Omnium. In addition to that, Commercial Vehicle is 1.27 times more volatile than Plastic Omnium. It trades about -0.12 of its total potential returns per unit of risk. Plastic Omnium is currently generating about 0.0 per unit of volatility. If you would invest  1,077  in Plastic Omnium on September 28, 2024 and sell it today you would lose (112.00) from holding Plastic Omnium or give up 10.4% of portfolio value over 90 days.

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

Commercial Vehicle Group  vs.  Plastic Omnium

Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commercial Vehicle Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Plastic Omnium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Plastic Omnium is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Commercial Vehicle and Plastic Omnium

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

The idea behind Commercial Vehicle Group and Plastic Omnium 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.