Correlation Between Derichebourg and Plastiques

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

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

Diversification Opportunities for Derichebourg and Plastiques

-0.37

Correlation Coefficient

Derichebourg  Plastiques

Very good diversification

The 3 months correlation between Derichebourg and Plastiques is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and Plastiques du Val in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastiques du Val and Derichebourg 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 Derichebourg are associated (or correlated) with Plastiques. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastiques du Val has no effect on the direction of Derichebourg i.e., Derichebourg and Plastiques go up and down completely randomly.

Pair Corralation between Derichebourg and Plastiques

Assuming the 90 days trading horizon Derichebourg is expected to generate 0.57 times more return on investment than Plastiques. However, Derichebourg is 1.75 times less risky than Plastiques. It trades about 0.11 of its potential returns per unit of risk. Plastiques du Val is currently generating about 0.06 per unit of risk. If you would invest  517.00  in Derichebourg on December 27, 2024 and sell it today you would earn a total of  73.00  from holding Derichebourg or generate 14.12% return on investment over 90 days.

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

Derichebourg  vs.  Plastiques du Val

Derichebourg

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Derichebourg are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Derichebourg sustained solid returns over the last few months and may actually be approaching a breakup point.

Plastiques du Val

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plastiques du Val are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Plastiques sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Derichebourg and Plastiques

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

The idea behind Derichebourg and Plastiques du Val 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.