Correlation Between Gap, and Ardagh

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

By analyzing existing cross correlation between The Gap, and Ardagh Packaging Finance, you can compare the effects of market volatilities on Gap, and Ardagh 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 Gap, with a short position of Ardagh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Ardagh.

Diversification Opportunities for Gap, and Ardagh

-0.13

Correlation Coefficient

Gap,  Ardagh

Good diversification

The 3 months correlation between Gap, and Ardagh is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Ardagh Packaging Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardagh Packaging Finance and Gap, 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 The Gap, are associated (or correlated) with Ardagh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardagh Packaging Finance has no effect on the direction of Gap, i.e., Gap, and Ardagh go up and down completely randomly.

Pair Corralation between Gap, and Ardagh

Considering the 90-day investment horizon Gap, is expected to generate 4.39 times less return on investment than Ardagh. But when comparing it to its historical volatility, The Gap, is 2.57 times less risky than Ardagh. It trades about 0.13 of its potential returns per unit of risk. Ardagh Packaging Finance is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5,950  in Ardagh Packaging Finance on September 15, 2024 and sell it today you would earn a total of  1,650  from holding Ardagh Packaging Finance or generate 27.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

The Gap,  vs.  Ardagh Packaging Finance

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Ardagh Packaging Finance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ardagh Packaging Finance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ardagh sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gap, and Ardagh

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

The idea behind The Gap, and Ardagh Packaging Finance 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.