Correlation Between Superior Plus and Essentra Plc

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

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

Diversification Opportunities for Superior Plus and Essentra Plc

0.16

Correlation Coefficient

Superior Plus  Essentra Plc

Average diversification

The 3 months correlation between Superior and Essentra is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Essentra plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essentra plc and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Essentra Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essentra plc has no effect on the direction of Superior Plus i.e., Superior Plus and Essentra Plc go up and down completely randomly.

Pair Corralation between Superior Plus and Essentra Plc

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Essentra Plc. But the stock apears to be less risky and, when comparing its historical volatility, Superior Plus Corp is 1.26 times less risky than Essentra Plc. The stock trades about -0.03 of its potential returns per unit of risk. The Essentra plc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  196.00  in Essentra plc on October 5, 2024 and sell it today you would lose (37.00) from holding Essentra plc or give up 18.88% of portfolio value over 90 days.

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

Superior Plus Corp  vs.  Essentra plc

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Essentra plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essentra plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Superior Plus and Essentra Plc

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

The idea behind Superior Plus Corp and Essentra 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.