Correlation Between CCL Industries and North West

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Can any of the company-specific risk be diversified away by investing in both CCL Industries and North West 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 North West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CCL Industries and North West, you can compare the effects of market volatilities on CCL Industries and North West 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 North West. Check out your portfolio center. Please also check ongoing floating volatility patterns of CCL Industries and North West.

Diversification Opportunities for CCL Industries and North West

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between CCL and North is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries and North West in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North West 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 North West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North West has no effect on the direction of CCL Industries i.e., CCL Industries and North West go up and down completely randomly.

Pair Corralation between CCL Industries and North West

Assuming the 90 days trading horizon CCL Industries is expected to under-perform the North West. But the stock apears to be less risky and, when comparing its historical volatility, CCL Industries is 1.05 times less risky than North West. The stock trades about -0.06 of its potential returns per unit of risk. The North West is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,037  in North West on September 10, 2024 and sell it today you would earn a total of  218.00  from holding North West or generate 4.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CCL Industries  vs.  North West

 Performance 
       Timeline  
CCL Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 comparatively stable basic indicators, CCL Industries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
North West 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in North West are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, North West is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

CCL Industries and North West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CCL Industries and North West

The main advantage of trading using opposite CCL Industries and North West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CCL Industries position performs unexpectedly, North West 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 North West will offset losses from the drop in North West's long position.
The idea behind CCL Industries and North West 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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