Correlation Between Empire Metals and Sealed Air

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

By analyzing existing cross correlation between Empire Metals Limited and Sealed Air Corp, you can compare the effects of market volatilities on Empire Metals and Sealed Air 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 Empire Metals with a short position of Sealed Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and Sealed Air.

Diversification Opportunities for Empire Metals and Sealed Air

-0.47

Correlation Coefficient

Empire Metals  Sealed Air

Very good diversification

The 3 months correlation between Empire and Sealed is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and Sealed Air Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air Corp and Empire Metals 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 Empire Metals Limited are associated (or correlated) with Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air Corp has no effect on the direction of Empire Metals i.e., Empire Metals and Sealed Air go up and down completely randomly.

Pair Corralation between Empire Metals and Sealed Air

Assuming the 90 days trading horizon Empire Metals Limited is expected to under-perform the Sealed Air. In addition to that, Empire Metals is 2.4 times more volatile than Sealed Air Corp. It trades about -0.03 of its total potential returns per unit of risk. Sealed Air Corp is currently generating about 0.06 per unit of volatility. If you would invest  3,456  in Sealed Air Corp on September 17, 2024 and sell it today you would earn a total of  136.00  from holding Sealed Air Corp or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.85%
Values	Daily Returns

Empire Metals Limited  vs.  Sealed Air Corp

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Empire Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sealed Air Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sealed Air is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Empire Metals and Sealed Air

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

The idea behind Empire Metals Limited and Sealed Air 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.