Correlation Between CCL Industries and Parex Resources

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

By analyzing existing cross correlation between CCL Industries and Parex Resources, you can compare the effects of market volatilities on CCL Industries and Parex Resources 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 CCL Industries with a short position of Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of CCL Industries and Parex Resources.

Diversification Opportunities for CCL Industries and Parex Resources

0.05

Correlation Coefficient

CCL Industries  Parex Resources

Significant diversification

The 3 months correlation between CCL and Parex is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources and CCL Industries 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 CCL Industries are associated (or correlated) with Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of CCL Industries i.e., CCL Industries and Parex Resources go up and down completely randomly.

Pair Corralation between CCL Industries and Parex Resources

Assuming the 90 days trading horizon CCL Industries is expected to generate 0.44 times more return on investment than Parex Resources. However, CCL Industries is 2.29 times less risky than Parex Resources. It trades about 0.0 of its potential returns per unit of risk. Parex Resources is currently generating about -0.04 per unit of risk. If you would invest  7,164  in CCL Industries on December 2, 2024 and sell it today you would lose (115.00) from holding CCL Industries or give up 1.61% of portfolio value over 90 days.

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

CCL Industries  vs.  Parex Resources

CCL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days CCL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Parex Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parex Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Parex Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CCL Industries and Parex Resources

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

The idea behind CCL Industries and Parex Resources 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.