Correlation Between Avery Dennison and Crown Holdings

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

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

Diversification Opportunities for Avery Dennison and Crown Holdings

-0.32

Correlation Coefficient

Avery Dennison  Crown Holdings

Very good diversification

The 3 months correlation between Avery and Crown is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and Crown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Holdings and Avery Dennison 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 Avery Dennison Corp are associated (or correlated) with Crown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Holdings has no effect on the direction of Avery Dennison i.e., Avery Dennison and Crown Holdings go up and down completely randomly.

Pair Corralation between Avery Dennison and Crown Holdings

Considering the 90-day investment horizon Avery Dennison Corp is expected to under-perform the Crown Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Avery Dennison Corp is 1.1 times less risky than Crown Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Crown Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,295  in Crown Holdings on December 27, 2024 and sell it today you would earn a total of  699.00  from holding Crown Holdings or generate 8.43% return on investment over 90 days.

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

Avery Dennison Corp  vs.  Crown Holdings

Avery Dennison Corp

Risk-Adjusted Performance

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.

Crown Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Crown Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Avery Dennison and Crown Holdings

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

The idea behind Avery Dennison Corp and Crown Holdings 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.