Correlation Between Amcor PLC and Avery Dennison

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

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

Diversification Opportunities for Amcor PLC and Avery Dennison

0.84

Correlation Coefficient

Amcor PLC  Avery Dennison

Very poor diversification

The 3 months correlation between Amcor and Avery is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Amcor PLC 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 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 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 Amcor PLC i.e., Amcor PLC and Avery Dennison go up and down completely randomly.

Pair Corralation between Amcor PLC and Avery Dennison

Given the investment horizon of 90 days Amcor PLC is expected to generate 1.18 times more return on investment than Avery Dennison. However, Amcor PLC is 1.18 times more volatile than Avery Dennison Corp. It trades about -0.03 of its potential returns per unit of risk. Avery Dennison Corp is currently generating about -0.07 per unit of risk. If you would invest  1,105  in Amcor PLC on September 3, 2024 and sell it today you would lose (41.00) from holding Amcor PLC or give up 3.71% of portfolio value over 90 days.

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

Amcor PLC  vs.  Avery Dennison Corp

Amcor PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amcor PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Amcor PLC is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 fairly strong basic indicators, Avery Dennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amcor PLC and Avery Dennison

The main advantage of trading using opposite Amcor PLC and Avery Dennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcor PLC 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 Amcor PLC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.