Correlation Between Plastic Omnium and Archer Materials

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

By analyzing existing cross correlation between Plastic Omnium and Archer Materials Limited, you can compare the effects of market volatilities on Plastic Omnium and Archer Materials 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 Plastic Omnium with a short position of Archer Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plastic Omnium and Archer Materials.

Diversification Opportunities for Plastic Omnium and Archer Materials

0.02

Correlation Coefficient

Plastic Omnium  Archer Materials

Significant diversification

The 3 months correlation between Plastic and Archer is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and Archer Materials Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Materials and Plastic Omnium 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 Plastic Omnium are associated (or correlated) with Archer Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Materials has no effect on the direction of Plastic Omnium i.e., Plastic Omnium and Archer Materials go up and down completely randomly.

Pair Corralation between Plastic Omnium and Archer Materials

Assuming the 90 days trading horizon Plastic Omnium is expected to generate 0.55 times more return on investment than Archer Materials. However, Plastic Omnium is 1.82 times less risky than Archer Materials. It trades about 0.27 of its potential returns per unit of risk. Archer Materials Limited is currently generating about 0.07 per unit of risk. If you would invest  823.00  in Plastic Omnium on April 20, 2025 and sell it today you would earn a total of  396.00  from holding Plastic Omnium or generate 48.12% return on investment over 90 days.

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

Plastic Omnium  vs.  Archer Materials Limited

Plastic Omnium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Plastic Omnium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Archer Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Materials Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Archer Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plastic Omnium and Archer Materials

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

The idea behind Plastic Omnium and Archer Materials Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.