Correlation Between CCL Industries and AOYAMA TRADING

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

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

Diversification Opportunities for CCL Industries and AOYAMA TRADING

-0.8

Correlation Coefficient

CCL Industries  AOYAMA TRADING

Pay attention - limited upside

The 3 months correlation between CCL and AOYAMA is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries and AOYAMA TRADING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOYAMA TRADING and CCL Industries 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 CCL Industries are associated (or correlated) with AOYAMA TRADING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOYAMA TRADING has no effect on the direction of CCL Industries i.e., CCL Industries and AOYAMA TRADING go up and down completely randomly.

Pair Corralation between CCL Industries and AOYAMA TRADING

Assuming the 90 days horizon CCL Industries is expected to generate 0.87 times more return on investment than AOYAMA TRADING. However, CCL Industries is 1.15 times less risky than AOYAMA TRADING. It trades about -0.1 of its potential returns per unit of risk. AOYAMA TRADING is currently generating about -0.12 per unit of risk. If you would invest  4,971  in CCL Industries on October 11, 2024 and sell it today you would lose (111.00) from holding CCL Industries or give up 2.23% of portfolio value over 90 days.

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

CCL Industries  vs.  AOYAMA TRADING

CCL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AOYAMA TRADING

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AOYAMA TRADING are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AOYAMA TRADING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CCL Industries and AOYAMA TRADING

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

The idea behind CCL Industries and AOYAMA TRADING 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.