Correlation Between ACL Plastics and Peoples Insurance

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

By analyzing existing cross correlation between ACL Plastics PLC and Peoples Insurance PLC, you can compare the effects of market volatilities on ACL Plastics and Peoples Insurance 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 ACL Plastics with a short position of Peoples Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACL Plastics and Peoples Insurance.

Diversification Opportunities for ACL Plastics and Peoples Insurance

0.07

Correlation Coefficient

ACL Plastics  Peoples Insurance

Significant diversification

The 3 months correlation between ACL and Peoples is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ACL Plastics PLC and Peoples Insurance PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples Insurance PLC and ACL Plastics 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 ACL Plastics PLC are associated (or correlated) with Peoples Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Insurance PLC has no effect on the direction of ACL Plastics i.e., ACL Plastics and Peoples Insurance go up and down completely randomly.

Pair Corralation between ACL Plastics and Peoples Insurance

Assuming the 90 days trading horizon ACL Plastics PLC is expected to generate 0.84 times more return on investment than Peoples Insurance. However, ACL Plastics PLC is 1.2 times less risky than Peoples Insurance. It trades about 0.08 of its potential returns per unit of risk. Peoples Insurance PLC is currently generating about -0.05 per unit of risk. If you would invest  57,100  in ACL Plastics PLC on December 31, 2024 and sell it today you would earn a total of  5,100  from holding ACL Plastics PLC or generate 8.93% return on investment over 90 days.

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

ACL Plastics PLC  vs.  Peoples Insurance PLC

ACL Plastics PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ACL Plastics PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ACL Plastics may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Peoples Insurance PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peoples Insurance PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ACL Plastics and Peoples Insurance

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

The idea behind ACL Plastics PLC and Peoples Insurance 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.