Correlation Between Graphic Packaging and Packaging

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

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

Diversification Opportunities for Graphic Packaging and Packaging

0.63

Correlation Coefficient

Graphic Packaging  Packaging

Poor diversification

The 3 months correlation between Graphic and Packaging is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Graphic Packaging Holding and Packaging of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packaging and Graphic Packaging 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 Graphic Packaging Holding are associated (or correlated) with Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packaging has no effect on the direction of Graphic Packaging i.e., Graphic Packaging and Packaging go up and down completely randomly.

Pair Corralation between Graphic Packaging and Packaging

Assuming the 90 days horizon Graphic Packaging Holding is expected to under-perform the Packaging. In addition to that, Graphic Packaging is 1.28 times more volatile than Packaging of. It trades about 0.0 of its total potential returns per unit of risk. Packaging of is currently generating about 0.17 per unit of volatility. If you would invest  18,262  in Packaging of on October 3, 2024 and sell it today you would earn a total of  3,148  from holding Packaging of or generate 17.24% return on investment over 90 days.

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

Graphic Packaging Holding  vs.  Packaging of

Graphic Packaging Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Packaging

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Packaging reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graphic Packaging and Packaging

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

The idea behind Graphic Packaging Holding and Packaging of 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.