Correlation Between Financiere Hoche and Parx Plastics

Can any of the company-specific risk be diversified away by investing in both Financiere Hoche and Parx Plastics 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 Financiere Hoche and Parx Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Financiere Hoche Bains Les Bains and Parx Plastics NV, you can compare the effects of market volatilities on Financiere Hoche and Parx Plastics 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 Financiere Hoche with a short position of Parx Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financiere Hoche and Parx Plastics.

Diversification Opportunities for Financiere Hoche and Parx Plastics

-0.65

Correlation Coefficient

Financiere Hoche  Parx Plastics

Excellent diversification

The 3 months correlation between Financiere and Parx is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Financiere Hoche Bains Les Bai and Parx Plastics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parx Plastics NV and Financiere Hoche 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 Financiere Hoche Bains Les Bains are associated (or correlated) with Parx Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parx Plastics NV has no effect on the direction of Financiere Hoche i.e., Financiere Hoche and Parx Plastics go up and down completely randomly.

Pair Corralation between Financiere Hoche and Parx Plastics

Assuming the 90 days trading horizon Financiere Hoche Bains Les Bains is expected to generate 0.28 times more return on investment than Parx Plastics. However, Financiere Hoche Bains Les Bains is 3.56 times less risky than Parx Plastics. It trades about 0.19 of its potential returns per unit of risk. Parx Plastics NV is currently generating about -0.19 per unit of risk. If you would invest  7,300  in Financiere Hoche Bains Les Bains on December 24, 2024 and sell it today you would earn a total of  1,150  from holding Financiere Hoche Bains Les Bains or generate 15.75% return on investment over 90 days.

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

Financiere Hoche Bains Les Bai  vs.  Parx Plastics NV

Financiere Hoche Bains

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financiere Hoche Bains Les Bains are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Financiere Hoche reported solid returns over the last few months and may actually be approaching a breakup point.

Parx Plastics NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parx Plastics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Financiere Hoche and Parx Plastics

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

The idea behind Financiere Hoche Bains Les Bains and Parx Plastics NV 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.