Correlation Between AXA SA and Plastic Omnium

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

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

Diversification Opportunities for AXA SA and Plastic Omnium

0.42

Correlation Coefficient

AXA SA  Plastic Omnium

Very weak diversification

The 3 months correlation between AXA and Plastic is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding AXA SA and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium and AXA SA 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 AXA SA 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 AXA SA i.e., AXA SA and Plastic Omnium go up and down completely randomly.

Pair Corralation between AXA SA and Plastic Omnium

Assuming the 90 days trading horizon AXA SA is expected to generate 11.41 times less return on investment than Plastic Omnium. But when comparing it to its historical volatility, AXA SA is 2.04 times less risky than Plastic Omnium. It trades about 0.02 of its potential returns per unit of risk. Plastic Omnium is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  929.00  in Plastic Omnium on October 24, 2024 and sell it today you would earn a total of  143.00  from holding Plastic Omnium or generate 15.39% return on investment over 90 days.

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

AXA SA  vs.  Plastic Omnium

AXA SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AXA SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AXA SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Plastic Omnium

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Plastic Omnium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AXA SA and Plastic Omnium

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

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.