Correlation Between Parx Plastics and Esso SAF

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

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

Diversification Opportunities for Parx Plastics and Esso SAF

-0.56

Correlation Coefficient

Parx Plastics  Esso SAF

Excellent diversification

The 3 months correlation between Parx and Esso is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Parx Plastics NV and Esso SAF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esso SAF and Parx Plastics 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 Parx Plastics NV are associated (or correlated) with Esso SAF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esso SAF has no effect on the direction of Parx Plastics i.e., Parx Plastics and Esso SAF go up and down completely randomly.

Pair Corralation between Parx Plastics and Esso SAF

Assuming the 90 days trading horizon Parx Plastics NV is expected to under-perform the Esso SAF. In addition to that, Parx Plastics is 1.46 times more volatile than Esso SAF. It trades about -0.18 of its total potential returns per unit of risk. Esso SAF is currently generating about 0.12 per unit of volatility. If you would invest  10,400  in Esso SAF on December 5, 2024 and sell it today you would earn a total of  1,460  from holding Esso SAF or generate 14.04% return on investment over 90 days.

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

Parx Plastics NV  vs.  Esso SAF

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.

Esso SAF

Risk-Adjusted Performance

OK

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

Pair Trading with Parx Plastics and Esso SAF

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

The idea behind Parx Plastics NV and Esso SAF 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.