Correlation Between Sovereign Metals and Compagnie Plastic
Can any of the company-specific risk be diversified away by investing in both Sovereign Metals 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 Sovereign Metals and Compagnie Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sovereign Metals and Compagnie Plastic Omnium, you can compare the effects of market volatilities on Sovereign Metals 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 Sovereign Metals with a short position of Compagnie Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sovereign Metals and Compagnie Plastic.
Diversification Opportunities for Sovereign Metals and Compagnie Plastic
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sovereign and Compagnie is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals i.e., Sovereign Metals and Compagnie Plastic go up and down completely randomly.
Pair Corralation between Sovereign Metals and Compagnie Plastic
Assuming the 90 days trading horizon Sovereign Metals is expected to generate 1.18 times more return on investment than Compagnie Plastic. However, Sovereign Metals is 1.18 times more volatile than Compagnie Plastic Omnium. It trades about 0.05 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about -0.01 per unit of risk. If you would invest 2,300 in Sovereign Metals on October 13, 2024 and sell it today you would earn a total of 1,500 from holding Sovereign Metals or generate 65.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sovereign Metals vs. Compagnie Plastic Omnium
Performance |
| Timeline |
| Sovereign Metals |
| Compagnie Plastic Omnium |
Sovereign Metals and Compagnie Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sovereign Metals and Compagnie Plastic
The main advantage of trading using opposite Sovereign Metals and Compagnie Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sovereign Metals 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.| Sovereign Metals vs. Pets at Home | Sovereign Metals vs. DFS Furniture PLC | Sovereign Metals vs. Beazer Homes USA | Sovereign Metals vs. Omega Healthcare Investors |
| Compagnie Plastic vs. Hilton Food Group | Compagnie Plastic vs. Dairy Farm International | Compagnie Plastic vs. Sovereign Metals | Compagnie Plastic vs. European Metals Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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