Correlation Between Materialise and Plastic Omnium

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

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

Diversification Opportunities for Materialise and Plastic Omnium

0.36

Correlation Coefficient

Materialise  Plastic Omnium

Weak diversification

The 3 months correlation between Materialise and Plastic is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium and Materialise 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 Materialise NV 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 Materialise i.e., Materialise and Plastic Omnium go up and down completely randomly.

Pair Corralation between Materialise and Plastic Omnium

Assuming the 90 days trading horizon Materialise NV is expected to generate 1.43 times more return on investment than Plastic Omnium. However, Materialise is 1.43 times more volatile than Plastic Omnium. It trades about 0.18 of its potential returns per unit of risk. Plastic Omnium is currently generating about 0.23 per unit of risk. If you would invest  645.00  in Materialise NV on September 17, 2024 and sell it today you would earn a total of  100.00  from holding Materialise NV or generate 15.5% return on investment over 90 days.

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

Materialise NV  vs.  Plastic Omnium

Materialise NV

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Plastic Omnium

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Plastic Omnium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materialise and Plastic Omnium

The main advantage of trading using opposite Materialise and Plastic Omnium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materialise 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 Materialise NV 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..