Correlation Between Compagnie Plastic and Rolls-Royce Holdings

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

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

Diversification Opportunities for Compagnie Plastic and Rolls-Royce Holdings

-0.13

Correlation Coefficient

Compagnie Plastic  Rolls-Royce Holdings

Good diversification

The 3 months correlation between Compagnie and Rolls-Royce is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Plastic Omnium and Rolls Royce Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings and Compagnie Plastic 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 Compagnie Plastic Omnium are associated (or correlated) with Rolls-Royce Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of Compagnie Plastic i.e., Compagnie Plastic and Rolls-Royce Holdings go up and down completely randomly.

Pair Corralation between Compagnie Plastic and Rolls-Royce Holdings

Assuming the 90 days trading horizon Compagnie Plastic is expected to generate 5.75 times less return on investment than Rolls-Royce Holdings. In addition to that, Compagnie Plastic is 1.04 times more volatile than Rolls Royce Holdings PLC. It trades about 0.03 of its total potential returns per unit of risk. Rolls Royce Holdings PLC is currently generating about 0.2 per unit of volatility. If you would invest  57,560  in Rolls Royce Holdings PLC on December 22, 2024 and sell it today you would earn a total of  22,500  from holding Rolls Royce Holdings PLC or generate 39.09% return on investment over 90 days.

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

Compagnie Plastic Omnium  vs.  Rolls Royce Holdings PLC

Compagnie Plastic Omnium

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Compagnie Plastic is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Rolls Royce Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Rolls-Royce Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Plastic and Rolls-Royce Holdings

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

The idea behind Compagnie Plastic Omnium and Rolls Royce Holdings 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.