Correlation Between Compagnie Plastic and Vulcan Materials

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

Diversification Opportunities for Compagnie Plastic and Vulcan Materials

0.17

Correlation Coefficient

Compagnie Plastic  Vulcan Materials

Average diversification

The 3 months correlation between Compagnie and Vulcan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Plastic Omnium and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Compagnie Plastic i.e., Compagnie Plastic and Vulcan Materials go up and down completely randomly.

Pair Corralation between Compagnie Plastic and Vulcan Materials

Assuming the 90 days horizon Compagnie Plastic Omnium is expected to generate 2.1 times more return on investment than Vulcan Materials. However, Compagnie Plastic is 2.1 times more volatile than Vulcan Materials. It trades about 0.39 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.36 per unit of risk. If you would invest  808.00  in Compagnie Plastic Omnium on September 24, 2024 and sell it today you would earn a total of  164.00  from holding Compagnie Plastic Omnium or generate 20.3% return on investment over 90 days.

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

Compagnie Plastic Omnium  vs.  Vulcan Materials

Compagnie Plastic Omnium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 9 (%) 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.

Vulcan Materials

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Plastic and Vulcan Materials

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

The idea behind Compagnie Plastic Omnium and Vulcan Materials 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.