Correlation Between BII Railway and Plastic Omnium
Can any of the company-specific risk be diversified away by investing in both BII Railway 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 BII Railway and Plastic Omnium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BII Railway Transportation and Plastic Omnium, you can compare the effects of market volatilities on BII Railway 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 BII Railway with a short position of Plastic Omnium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Plastic Omnium.
Diversification Opportunities for BII Railway and Plastic Omnium
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BII and Plastic is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium and BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and Plastic Omnium go up and down completely randomly.
Pair Corralation between BII Railway and Plastic Omnium
Assuming the 90 days horizon BII Railway Transportation is expected to under-perform the Plastic Omnium. But the stock apears to be less risky and, when comparing its historical volatility, BII Railway Transportation is 1.82 times less risky than Plastic Omnium. The stock trades about -0.05 of its potential returns per unit of risk. The Plastic Omnium is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 994.00 in Plastic Omnium on November 2, 2024 and sell it today you would earn a total of 95.00 from holding Plastic Omnium or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BII Railway Transportation vs. Plastic Omnium
Performance |
| Timeline |
| BII Railway Transpor |
| Plastic Omnium |
BII Railway and Plastic Omnium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BII Railway and Plastic Omnium
The main advantage of trading using opposite BII Railway and Plastic Omnium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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.| BII Railway vs. MOVIE GAMES SA | BII Railway vs. Jacquet Metal Service | BII Railway vs. GAMESTOP | BII Railway vs. AMAG Austria Metall |
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Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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