Correlation Between IMPERIAL TOBACCO and Polyplex Public

Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and Polyplex Public 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 IMPERIAL TOBACCO and Polyplex Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for IMPERIAL TOBACCO and Polyplex Public

0.93

Correlation Coefficient

IMPERIAL TOBACCO  Polyplex Public

Almost no diversification

The 3 months correlation between IMPERIAL and Polyplex is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Polyplex Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polyplex Public and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with Polyplex Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polyplex Public has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Polyplex Public go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and Polyplex Public

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.43 times more return on investment than Polyplex Public. However, IMPERIAL TOBACCO is 2.3 times less risky than Polyplex Public. It trades about 0.04 of its potential returns per unit of risk. Polyplex Public is currently generating about -0.31 per unit of risk. If you would invest  3,096  in IMPERIAL TOBACCO on October 26, 2024 and sell it today you would earn a total of  14.00  from holding IMPERIAL TOBACCO or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.74%
Values	Daily Returns

IMPERIAL TOBACCO   vs.  Polyplex Public

IMPERIAL TOBACCO

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, IMPERIAL TOBACCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Polyplex Public

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with IMPERIAL TOBACCO and Polyplex Public

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

The idea behind IMPERIAL TOBACCO and Polyplex Public 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.