Correlation Between Ball and Avery Dennison

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

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

Diversification Opportunities for Ball and Avery Dennison

0.89

Correlation Coefficient

Ball  Avery Dennison

Very poor diversification

The 3 months correlation between Ball and Avery is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Ball Corp. and Avery Dennison Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison Corp and Ball 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 Ball Corporation are associated (or correlated) with Avery Dennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avery Dennison Corp has no effect on the direction of Ball i.e., Ball and Avery Dennison go up and down completely randomly.

Pair Corralation between Ball and Avery Dennison

Given the investment horizon of 90 days Ball is expected to generate 1.53 times less return on investment than Avery Dennison. In addition to that, Ball is 1.42 times more volatile than Avery Dennison Corp. It trades about 0.01 of its total potential returns per unit of risk. Avery Dennison Corp is currently generating about 0.03 per unit of volatility. If you would invest  16,653  in Avery Dennison Corp on December 2, 2024 and sell it today you would earn a total of  2,144  from holding Avery Dennison Corp or generate 12.87% return on investment over 90 days.

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

Ball Corp.  vs.  Avery Dennison Corp

Ball

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ball Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Ball and Avery Dennison

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

The idea behind Ball Corporation and Avery Dennison Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.