Correlation Between Avery Dennison and Karat Packaging

Can any of the company-specific risk be diversified away by investing in both Avery Dennison 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 Avery Dennison and Karat Packaging 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 Karat Packaging, you can compare the effects of market volatilities on Avery Dennison 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 Avery Dennison with a short position of Karat Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avery Dennison and Karat Packaging.

Diversification Opportunities for Avery Dennison and Karat Packaging

-0.77

Correlation Coefficient

Avery Dennison  Karat Packaging

Pay attention - limited upside

The 3 months correlation between Avery and Karat is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging 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 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 Avery Dennison i.e., Avery Dennison and Karat Packaging go up and down completely randomly.

Pair Corralation between Avery Dennison and Karat Packaging

Considering the 90-day investment horizon Avery Dennison Corp is expected to under-perform the Karat Packaging. But the stock apears to be less risky and, when comparing its historical volatility, Avery Dennison Corp is 1.43 times less risky than Karat Packaging. The stock trades about -0.09 of its potential returns per unit of risk. The Karat Packaging is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,499  in Karat Packaging on August 30, 2024 and sell it today you would earn a total of  547.00  from holding Karat Packaging or generate 21.89% return on investment over 90 days.

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

Avery Dennison Corp  vs.  Karat Packaging

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Karat Packaging

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Karat Packaging are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Karat Packaging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avery Dennison and Karat Packaging

The main advantage of trading using opposite Avery Dennison and Karat Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avery Dennison 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 Avery Dennison Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.