Correlation Between Plastic Omnium and Charles Schwab

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

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

Diversification Opportunities for Plastic Omnium and Charles Schwab

0.1

Correlation Coefficient

Plastic Omnium  Charles Schwab

Average diversification

The 3 months correlation between Plastic and Charles is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Plastic Omnium i.e., Plastic Omnium and Charles Schwab go up and down completely randomly.

Pair Corralation between Plastic Omnium and Charles Schwab

Assuming the 90 days trading horizon Plastic Omnium is expected to under-perform the Charles Schwab. But the stock apears to be less risky and, when comparing its historical volatility, Plastic Omnium is 1.09 times less risky than Charles Schwab. The stock trades about -0.05 of its potential returns per unit of risk. The The Charles Schwab is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  6,470  in The Charles Schwab on September 1, 2024 and sell it today you would earn a total of  1,351  from holding The Charles Schwab or generate 20.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Plastic Omnium  vs.  The Charles Schwab

Plastic Omnium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 1 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Charles Schwab

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Charles Schwab reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plastic Omnium and Charles Schwab

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

The idea behind Plastic Omnium and The Charles Schwab 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.