Correlation Between MOLSON RS and Smurfit Kappa

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

By analyzing existing cross correlation between MOLSON RS BEVERAGE and Smurfit Kappa Group, you can compare the effects of market volatilities on MOLSON RS and Smurfit Kappa 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 MOLSON RS with a short position of Smurfit Kappa. Check out your portfolio center. Please also check ongoing floating volatility patterns of MOLSON RS and Smurfit Kappa.

Diversification Opportunities for MOLSON RS and Smurfit Kappa

0.84

Correlation Coefficient

MOLSON RS  Smurfit Kappa

Very poor diversification

The 3 months correlation between MOLSON and Smurfit is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MOLSON RS BEVERAGE and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group and MOLSON RS 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 MOLSON RS BEVERAGE are associated (or correlated) with Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of MOLSON RS i.e., MOLSON RS and Smurfit Kappa go up and down completely randomly.

Pair Corralation between MOLSON RS and Smurfit Kappa

Assuming the 90 days trading horizon MOLSON RS BEVERAGE is expected to generate 0.75 times more return on investment than Smurfit Kappa. However, MOLSON RS BEVERAGE is 1.34 times less risky than Smurfit Kappa. It trades about 0.0 of its potential returns per unit of risk. Smurfit Kappa Group is currently generating about -0.02 per unit of risk. If you would invest  5,506  in MOLSON RS BEVERAGE on October 4, 2024 and sell it today you would lose (6.00) from holding MOLSON RS BEVERAGE or give up 0.11% of portfolio value over 90 days.

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

MOLSON RS BEVERAGE  vs.  Smurfit Kappa Group

MOLSON RS BEVERAGE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MOLSON RS BEVERAGE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MOLSON RS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Smurfit Kappa Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MOLSON RS and Smurfit Kappa

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

The idea behind MOLSON RS BEVERAGE and Smurfit Kappa Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.