Correlation Between Cars and Synthomer Plc

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

By analyzing existing cross correlation between Cars Inc and Synthomer plc, you can compare the effects of market volatilities on Cars and Synthomer Plc 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 Cars with a short position of Synthomer Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Synthomer Plc.

Diversification Opportunities for Cars and Synthomer Plc

-0.01

Correlation Coefficient

Cars  Synthomer Plc

Good diversification

The 3 months correlation between Cars and Synthomer is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Synthomer plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synthomer plc and Cars 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 Cars Inc are associated (or correlated) with Synthomer Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synthomer plc has no effect on the direction of Cars i.e., Cars and Synthomer Plc go up and down completely randomly.

Pair Corralation between Cars and Synthomer Plc

Assuming the 90 days trading horizon Cars Inc is expected to under-perform the Synthomer Plc. But the stock apears to be less risky and, when comparing its historical volatility, Cars Inc is 1.01 times less risky than Synthomer Plc. The stock trades about -0.38 of its potential returns per unit of risk. The Synthomer plc is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  17,100  in Synthomer plc on October 9, 2024 and sell it today you would lose (1,960) from holding Synthomer plc or give up 11.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.11%
Values	Daily Returns

Cars Inc  vs.  Synthomer plc

Cars Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cars unveiled solid returns over the last few months and may actually be approaching a breakup point.

Synthomer plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synthomer plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cars and Synthomer Plc

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

The idea behind Cars Inc and Synthomer plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.