Correlation Between Plastiques and Gevelot

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

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

Diversification Opportunities for Plastiques and Gevelot

0.47

Correlation Coefficient

Plastiques  Gevelot

Very weak diversification

The 3 months correlation between Plastiques and Gevelot is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Plastiques du Val and Gevelot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gevelot and Plastiques 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 Plastiques du Val are associated (or correlated) with Gevelot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gevelot has no effect on the direction of Plastiques i.e., Plastiques and Gevelot go up and down completely randomly.

Pair Corralation between Plastiques and Gevelot

Assuming the 90 days trading horizon Plastiques du Val is expected to under-perform the Gevelot. In addition to that, Plastiques is 1.82 times more volatile than Gevelot. It trades about -0.09 of its total potential returns per unit of risk. Gevelot is currently generating about -0.03 per unit of volatility. If you would invest  19,400  in Gevelot on September 13, 2024 and sell it today you would lose (600.00) from holding Gevelot or give up 3.09% of portfolio value over 90 days.

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

Plastiques du Val  vs.  Gevelot

Plastiques du Val

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plastiques du Val has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat 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.

Gevelot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gevelot has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Gevelot is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Plastiques and Gevelot

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

The idea behind Plastiques du Val and Gevelot 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.