Correlation Between Compagnie Plastic and Qingling Motors

Can any of the company-specific risk be diversified away by investing in both Compagnie Plastic and Qingling Motors 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 Qingling Motors 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 Qingling Motors Co, you can compare the effects of market volatilities on Compagnie Plastic and Qingling Motors 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 Qingling Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Plastic and Qingling Motors.

Diversification Opportunities for Compagnie Plastic and Qingling Motors

0.27

Correlation Coefficient

Compagnie Plastic  Qingling Motors

Modest diversification

The 3 months correlation between Compagnie and Qingling is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Plastic Omnium and Qingling Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingling Motors 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 Qingling Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingling Motors has no effect on the direction of Compagnie Plastic i.e., Compagnie Plastic and Qingling Motors go up and down completely randomly.

Pair Corralation between Compagnie Plastic and Qingling Motors

Assuming the 90 days horizon Compagnie Plastic Omnium is expected to generate 0.8 times more return on investment than Qingling Motors. However, Compagnie Plastic Omnium is 1.25 times less risky than Qingling Motors. It trades about 0.04 of its potential returns per unit of risk. Qingling Motors Co is currently generating about 0.02 per unit of risk. If you would invest  921.00  in Compagnie Plastic Omnium on October 7, 2024 and sell it today you would earn a total of  76.00  from holding Compagnie Plastic Omnium or generate 8.25% return on investment over 90 days.

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

Compagnie Plastic Omnium  vs.  Qingling Motors Co

Compagnie Plastic Omnium

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compagnie Plastic reported solid returns over the last few months and may actually be approaching a breakup point.

Qingling Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qingling Motors Co 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 Compagnie Plastic and Qingling Motors

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

The idea behind Compagnie Plastic Omnium and Qingling Motors Co 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.