Correlation Between Amcor PLC and Reynolds Consumer

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

By analyzing existing cross correlation between Amcor PLC and Reynolds Consumer Products, you can compare the effects of market volatilities on Amcor PLC and Reynolds Consumer 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 Reynolds Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcor PLC and Reynolds Consumer.

Diversification Opportunities for Amcor PLC and Reynolds Consumer

-0.13

Correlation Coefficient

Amcor PLC  Reynolds Consumer

Good diversification

The 3 months correlation between Amcor and Reynolds is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Amcor PLC and Reynolds Consumer Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reynolds Consumer 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 Reynolds Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reynolds Consumer has no effect on the direction of Amcor PLC i.e., Amcor PLC and Reynolds Consumer go up and down completely randomly.

Pair Corralation between Amcor PLC and Reynolds Consumer

Given the investment horizon of 90 days Amcor PLC is expected to generate 0.69 times more return on investment than Reynolds Consumer. However, Amcor PLC is 1.45 times less risky than Reynolds Consumer. It trades about 0.17 of its potential returns per unit of risk. Reynolds Consumer Products is currently generating about -0.24 per unit of risk. If you would invest  963.00  in Amcor PLC on December 1, 2024 and sell it today you would earn a total of  49.00  from holding Amcor PLC or generate 5.09% return on investment over 90 days.

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

Amcor PLC  vs.  Reynolds Consumer Products

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. 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.

Reynolds Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reynolds Consumer Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Amcor PLC and Reynolds Consumer

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

The idea behind Amcor PLC and Reynolds Consumer Products 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.