Correlation Between Plastic Omnium and INDIKA ENERGY

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

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

Diversification Opportunities for Plastic Omnium and INDIKA ENERGY

0.53

Correlation Coefficient

Plastic Omnium  INDIKA ENERGY

Very weak diversification

The 3 months correlation between Plastic and INDIKA is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and INDIKA ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDIKA ENERGY and Plastic Omnium 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 Plastic Omnium are associated (or correlated) with INDIKA ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDIKA ENERGY has no effect on the direction of Plastic Omnium i.e., Plastic Omnium and INDIKA ENERGY go up and down completely randomly.

Pair Corralation between Plastic Omnium and INDIKA ENERGY

Assuming the 90 days trading horizon Plastic Omnium is expected to generate 0.47 times more return on investment than INDIKA ENERGY. However, Plastic Omnium is 2.11 times less risky than INDIKA ENERGY. It trades about 0.03 of its potential returns per unit of risk. INDIKA ENERGY is currently generating about -0.02 per unit of risk. If you would invest  965.00  in Plastic Omnium on December 23, 2024 and sell it today you would earn a total of  29.00  from holding Plastic Omnium or generate 3.01% return on investment over 90 days.

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

Plastic Omnium  vs.  INDIKA ENERGY

Plastic Omnium

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Plastic Omnium is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

INDIKA ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days INDIKA ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Plastic Omnium and INDIKA ENERGY

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

The idea behind Plastic Omnium and INDIKA ENERGY 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.