Correlation Between Good Natured and Sonoco Products

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

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

Diversification Opportunities for Good Natured and Sonoco Products

0.41

Correlation Coefficient

Good Natured  Sonoco Products

Very weak diversification

The 3 months correlation between Good and Sonoco is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Good Natured Products and Sonoco Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonoco Products and Good Natured 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 Good Natured Products are associated (or correlated) with Sonoco Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonoco Products has no effect on the direction of Good Natured i.e., Good Natured and Sonoco Products go up and down completely randomly.

Pair Corralation between Good Natured and Sonoco Products

Assuming the 90 days horizon Good Natured Products is expected to generate 10.95 times more return on investment than Sonoco Products. However, Good Natured is 10.95 times more volatile than Sonoco Products. It trades about 0.01 of its potential returns per unit of risk. Sonoco Products is currently generating about -0.03 per unit of risk. If you would invest  7.70  in Good Natured Products on October 22, 2024 and sell it today you would lose (7.16) from holding Good Natured Products or give up 92.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.05%
Values	Daily Returns

Good Natured Products  vs.  Sonoco Products

Good Natured Products

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Good Natured Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Good Natured reported solid returns over the last few months and may actually be approaching a breakup point.

Sonoco Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonoco Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Good Natured and Sonoco Products

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

The idea behind Good Natured Products and Sonoco Products 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.