Correlation Between O I and Ardagh Metal

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

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

Diversification Opportunities for O I and Ardagh Metal

0.6

Correlation Coefficient

O I  Ardagh Metal

Poor diversification

The 3 months correlation between O I and Ardagh is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding O I Glass and Ardagh Metal Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardagh Metal Packaging and O I 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 O I Glass are associated (or correlated) with Ardagh Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardagh Metal Packaging has no effect on the direction of O I i.e., O I and Ardagh Metal go up and down completely randomly.

Pair Corralation between O I and Ardagh Metal

Allowing for the 90-day total investment horizon O I Glass is expected to under-perform the Ardagh Metal. But the stock apears to be less risky and, when comparing its historical volatility, O I Glass is 1.33 times less risky than Ardagh Metal. The stock trades about -0.74 of its potential returns per unit of risk. The Ardagh Metal Packaging is currently generating about -0.38 of returns per unit of risk over similar time horizon. If you would invest  361.00  in Ardagh Metal Packaging on September 22, 2024 and sell it today you would lose (58.00) from holding Ardagh Metal Packaging or give up 16.07% of portfolio value over 90 days.

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

O I Glass  vs.  Ardagh Metal Packaging

O I Glass

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days O I Glass has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ardagh Metal Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardagh Metal Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with O I and Ardagh Metal

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

The idea behind O I Glass and Ardagh Metal Packaging 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.