Correlation Between Plastic Omnium and Mitie Group

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

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

Diversification Opportunities for Plastic Omnium and Mitie Group

0.01

Correlation Coefficient

Plastic Omnium  Mitie Group

Significant diversification

The 3 months correlation between Plastic and Mitie is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Plastic Omnium i.e., Plastic Omnium and Mitie Group go up and down completely randomly.

Pair Corralation between Plastic Omnium and Mitie Group

Assuming the 90 days trading horizon Plastic Omnium is expected to generate 1.35 times more return on investment than Mitie Group. However, Plastic Omnium is 1.35 times more volatile than Mitie Group PLC. It trades about 0.13 of its potential returns per unit of risk. Mitie Group PLC is currently generating about -0.02 per unit of risk. If you would invest  805.00  in Plastic Omnium on September 14, 2024 and sell it today you would earn a total of  199.00  from holding Plastic Omnium or generate 24.72% return on investment over 90 days.

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

Plastic Omnium  vs.  Mitie Group PLC

Plastic Omnium

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Plastic Omnium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mitie Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitie Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mitie Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Plastic Omnium and Mitie Group

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

The idea behind Plastic Omnium and Mitie Group PLC 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.