Correlation Between Amcor Plc and Smurfit Kappa

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

By analyzing existing cross correlation between Amcor plc and Smurfit Kappa Group, you can compare the effects of market volatilities on Amcor Plc and Smurfit Kappa 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 Amcor Plc with a short position of Smurfit Kappa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcor Plc and Smurfit Kappa.

Diversification Opportunities for Amcor Plc and Smurfit Kappa

0.39

Correlation Coefficient

Amcor Plc  Smurfit Kappa

Weak diversification

The 3 months correlation between Amcor and Smurfit is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Amcor plc and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group and Amcor Plc 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 Amcor plc are associated (or correlated) with Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of Amcor Plc i.e., Amcor Plc and Smurfit Kappa go up and down completely randomly.

Pair Corralation between Amcor Plc and Smurfit Kappa

Assuming the 90 days trading horizon Amcor plc is expected to under-perform the Smurfit Kappa. But the stock apears to be less risky and, when comparing its historical volatility, Amcor plc is 1.66 times less risky than Smurfit Kappa. The stock trades about -0.07 of its potential returns per unit of risk. The Smurfit Kappa Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,028  in Smurfit Kappa Group on November 28, 2024 and sell it today you would earn a total of  82.00  from holding Smurfit Kappa Group or generate 1.63% return on investment over 90 days.

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

Amcor plc  vs.  Smurfit Kappa Group

Amcor plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amcor plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Amcor Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Smurfit Kappa Group

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Smurfit Kappa is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Amcor Plc and Smurfit Kappa

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

The idea behind Amcor plc and Smurfit Kappa Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.