Correlation Between Avery Dennison and Packaging Corp

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

Diversification Opportunities for Avery Dennison and Packaging Corp

0.87

Correlation Coefficient

Avery Dennison  Packaging Corp

Very poor diversification

The 3 months correlation between Avery and Packaging is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and Packaging Corp of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packaging Corp 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 Packaging Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packaging Corp has no effect on the direction of Avery Dennison i.e., Avery Dennison and Packaging Corp go up and down completely randomly.

Pair Corralation between Avery Dennison and Packaging Corp

Considering the 90-day investment horizon Avery Dennison Corp is expected to generate 0.8 times more return on investment than Packaging Corp. However, Avery Dennison Corp is 1.26 times less risky than Packaging Corp. It trades about -0.14 of its potential returns per unit of risk. Packaging Corp of is currently generating about -0.17 per unit of risk. If you would invest  20,507  in Avery Dennison Corp on November 28, 2024 and sell it today you would lose (2,053) from holding Avery Dennison Corp or give up 10.01% of portfolio value over 90 days.

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

Avery Dennison Corp  vs.  Packaging Corp of

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 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.

Packaging Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Packaging Corp of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Avery Dennison and Packaging Corp

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

The idea behind Avery Dennison Corp and Packaging Corp of 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.