Correlation Between Alliance Creative and Avery Dennison

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

By analyzing existing cross correlation between Alliance Creative Gr and Avery Dennison Corp, you can compare the effects of market volatilities on Alliance Creative and Avery Dennison 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 Alliance Creative with a short position of Avery Dennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Creative and Avery Dennison.

Diversification Opportunities for Alliance Creative and Avery Dennison

0.17

Correlation Coefficient

Alliance Creative  Avery Dennison

Average diversification

The 3 months correlation between Alliance and Avery is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Creative Gr and Avery Dennison Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison Corp and Alliance Creative 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 Alliance Creative Gr are associated (or correlated) with Avery Dennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avery Dennison Corp has no effect on the direction of Alliance Creative i.e., Alliance Creative and Avery Dennison go up and down completely randomly.

Pair Corralation between Alliance Creative and Avery Dennison

Given the investment horizon of 90 days Alliance Creative Gr is expected to under-perform the Avery Dennison. In addition to that, Alliance Creative is 12.57 times more volatile than Avery Dennison Corp. It trades about -0.06 of its total potential returns per unit of risk. Avery Dennison Corp is currently generating about -0.22 per unit of volatility. If you would invest  19,873  in Avery Dennison Corp on September 22, 2024 and sell it today you would lose (1,060) from holding Avery Dennison Corp or give up 5.33% of portfolio value over 90 days.

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

Alliance Creative Gr  vs.  Avery Dennison Corp

Alliance Creative

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Creative Gr are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Alliance Creative showed solid returns over the last few months and may actually be approaching a breakup point.

Avery Dennison Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avery Dennison Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alliance Creative and Avery Dennison

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

The idea behind Alliance Creative Gr and Avery Dennison Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..