Correlation Between Plastiques and Derichebourg

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

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

Diversification Opportunities for Plastiques and Derichebourg

0.53

Correlation Coefficient

Plastiques  Derichebourg

Very weak diversification

The 3 months correlation between Plastiques and Derichebourg is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Plastiques du Val and Derichebourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derichebourg and Plastiques 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 Plastiques du Val are associated (or correlated) with Derichebourg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derichebourg has no effect on the direction of Plastiques i.e., Plastiques and Derichebourg go up and down completely randomly.

Pair Corralation between Plastiques and Derichebourg

Assuming the 90 days trading horizon Plastiques du Val is expected to under-perform the Derichebourg. In addition to that, Plastiques is 1.18 times more volatile than Derichebourg. It trades about -0.09 of its total potential returns per unit of risk. Derichebourg is currently generating about 0.05 per unit of volatility. If you would invest  433.00  in Derichebourg on October 22, 2024 and sell it today you would earn a total of  95.00  from holding Derichebourg or generate 21.94% return on investment over 90 days.

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

Plastiques du Val  vs.  Derichebourg

Plastiques du Val

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Plastiques du Val are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Plastiques sustained solid returns over the last few months and may actually be approaching a breakup point.

Derichebourg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derichebourg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Derichebourg is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Plastiques and Derichebourg

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

The idea behind Plastiques du Val and Derichebourg 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.