Correlation Between Sealed Air and Camellia Plc

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

By analyzing existing cross correlation between Sealed Air Corp and Camellia Plc, you can compare the effects of market volatilities on Sealed Air and Camellia 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 Sealed Air with a short position of Camellia Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and Camellia Plc.

Diversification Opportunities for Sealed Air and Camellia Plc

0.45

Correlation Coefficient

Sealed Air  Camellia Plc

Very weak diversification

The 3 months correlation between Sealed and Camellia is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air Corp and Camellia Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camellia Plc and Sealed Air 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 Sealed Air Corp are associated (or correlated) with Camellia Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camellia Plc has no effect on the direction of Sealed Air i.e., Sealed Air and Camellia Plc go up and down completely randomly.

Pair Corralation between Sealed Air and Camellia Plc

Assuming the 90 days trading horizon Sealed Air is expected to generate 1.79 times less return on investment than Camellia Plc. But when comparing it to its historical volatility, Sealed Air Corp is 1.36 times less risky than Camellia Plc. It trades about 0.09 of its potential returns per unit of risk. Camellia Plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  436,000  in Camellia Plc on September 14, 2024 and sell it today you would earn a total of  62,500  from holding Camellia Plc or generate 14.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Sealed Air Corp  vs.  Camellia Plc

Sealed Air Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sealed Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Camellia Plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Camellia Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Camellia Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sealed Air and Camellia Plc

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

The idea behind Sealed Air Corp and Camellia Plc 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.