Correlation Between Reinsurance Group and Compagnie Plastic

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Can any of the company-specific risk be diversified away by investing in both Reinsurance Group and Compagnie Plastic 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 Reinsurance Group and Compagnie Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reinsurance Group of and Compagnie Plastic Omnium, you can compare the effects of market volatilities on Reinsurance Group and Compagnie Plastic 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 Reinsurance Group with a short position of Compagnie Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and Compagnie Plastic.

Diversification Opportunities for Reinsurance Group and Compagnie Plastic

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Reinsurance and Compagnie is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and Compagnie Plastic go up and down completely randomly.

Pair Corralation between Reinsurance Group and Compagnie Plastic

Assuming the 90 days trading horizon Reinsurance Group is expected to generate 2.81 times less return on investment than Compagnie Plastic. But when comparing it to its historical volatility, Reinsurance Group of is 1.09 times less risky than Compagnie Plastic. It trades about 0.04 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  863.00  in Compagnie Plastic Omnium on October 10, 2024 and sell it today you would earn a total of  134.00  from holding Compagnie Plastic Omnium or generate 15.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Reinsurance Group of  vs.  Compagnie Plastic Omnium

 Performance 
       Timeline  
Reinsurance Group 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reinsurance Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Compagnie Plastic Omnium 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Compagnie Plastic reported solid returns over the last few months and may actually be approaching a breakup point.

Reinsurance Group and Compagnie Plastic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Reinsurance Group and Compagnie Plastic

The main advantage of trading using opposite Reinsurance Group and Compagnie Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group position performs unexpectedly, Compagnie Plastic 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 Compagnie Plastic will offset losses from the drop in Compagnie Plastic's long position.
The idea behind Reinsurance Group of and Compagnie Plastic Omnium 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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