Correlation Between Plains All and Torm PLC

Can any of the company-specific risk be diversified away by investing in both Plains All and Torm PLC 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 Plains All and Torm PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Plains All American and Torm PLC Class, you can compare the effects of market volatilities on Plains All and Torm PLC 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 Plains All with a short position of Torm PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plains All and Torm PLC.

Diversification Opportunities for Plains All and Torm PLC

-0.29

Correlation Coefficient

Plains All  Torm PLC

Very good diversification

The 3 months correlation between Plains and Torm is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Plains All American and Torm PLC Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torm PLC Class and Plains All 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 Plains All American are associated (or correlated) with Torm PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torm PLC Class has no effect on the direction of Plains All i.e., Plains All and Torm PLC go up and down completely randomly.

Pair Corralation between Plains All and Torm PLC

Considering the 90-day investment horizon Plains All American is expected to under-perform the Torm PLC. But the stock apears to be less risky and, when comparing its historical volatility, Plains All American is 2.32 times less risky than Torm PLC. The stock trades about -0.23 of its potential returns per unit of risk. The Torm PLC Class is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,998  in Torm PLC Class on October 6, 2024 and sell it today you would earn a total of  12.00  from holding Torm PLC Class or generate 0.6% return on investment over 90 days.

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

Plains All American  vs.  Torm PLC Class

Plains All American

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plains All American are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Plains All is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Torm PLC Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Torm PLC Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Plains All and Torm PLC

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

The idea behind Plains All American and Torm PLC Class 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.