Correlation Between International Consolidated and Compagnie Plastic

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

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

Diversification Opportunities for International Consolidated and Compagnie Plastic

0.44

Correlation Coefficient

International Consolidated  Compagnie Plastic

Very weak diversification

The 3 months correlation between International and Compagnie is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium and International Consolidated 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 International Consolidated Airlines are associated (or correlated) with Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of International Consolidated i.e., International Consolidated and Compagnie Plastic go up and down completely randomly.

Pair Corralation between International Consolidated and Compagnie Plastic

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 0.75 times more return on investment than Compagnie Plastic. However, International Consolidated Airlines is 1.33 times less risky than Compagnie Plastic. It trades about 0.27 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about 0.09 per unit of risk. If you would invest  246.00  in International Consolidated Airlines on September 20, 2024 and sell it today you would earn a total of  109.00  from holding International Consolidated Airlines or generate 44.31% return on investment over 90 days.

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

International Consolidated Air  vs.  Compagnie Plastic Omnium

International Consolidated

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

Compagnie Plastic Omnium

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compagnie Plastic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Consolidated and Compagnie Plastic

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

The idea behind International Consolidated Airlines and Compagnie 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.