Correlation Between Plastic Omnium and KKR Co

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

By analyzing existing cross correlation between Plastic Omnium and KKR Co LP, you can compare the effects of market volatilities on Plastic Omnium and KKR Co 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 KKR Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plastic Omnium and KKR Co.

Diversification Opportunities for Plastic Omnium and KKR Co

0.34

Correlation Coefficient

Plastic Omnium  KKR Co

Weak diversification

The 3 months correlation between Plastic and KKR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and KKR Co LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Co LP 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 KKR Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Co LP has no effect on the direction of Plastic Omnium i.e., Plastic Omnium and KKR Co go up and down completely randomly.

Pair Corralation between Plastic Omnium and KKR Co

Assuming the 90 days trading horizon Plastic Omnium is expected to generate 1.25 times more return on investment than KKR Co. However, Plastic Omnium is 1.25 times more volatile than KKR Co LP. It trades about -0.02 of its potential returns per unit of risk. KKR Co LP is currently generating about -0.15 per unit of risk. If you would invest  995.00  in Plastic Omnium on December 29, 2024 and sell it today you would lose (60.00) from holding Plastic Omnium or give up 6.03% of portfolio value over 90 days.

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

Plastic Omnium  vs.  KKR Co LP

Plastic Omnium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plastic Omnium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Plastic Omnium is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

KKR Co LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days KKR Co LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Plastic Omnium and KKR Co

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

The idea behind Plastic Omnium and KKR Co LP 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.