Correlation Between Amcor PLC and Karat Packaging

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

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

Diversification Opportunities for Amcor PLC and Karat Packaging

0.39

Correlation Coefficient

Amcor PLC  Karat Packaging

Weak diversification

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

Pair Corralation between Amcor PLC and Karat Packaging

Given the investment horizon of 90 days Amcor PLC is expected to generate 0.67 times more return on investment than Karat Packaging. However, Amcor PLC is 1.49 times less risky than Karat Packaging. It trades about 0.07 of its potential returns per unit of risk. Karat Packaging is currently generating about -0.04 per unit of risk. If you would invest  922.00  in Amcor PLC on December 28, 2024 and sell it today you would earn a total of  49.00  from holding Amcor PLC or generate 5.31% 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.  Karat Packaging

Amcor PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amcor PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Karat Packaging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Karat Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Karat Packaging is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Amcor PLC and Karat Packaging

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

The idea behind Amcor PLC and Karat Packaging 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.