Correlation Between EX PACK and E M

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

By analyzing existing cross correlation between EX PACK RUGATED CARTONS and E M L, you can compare the effects of market volatilities on EX PACK and E M 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 EX PACK with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of EX PACK and E M.

Diversification Opportunities for EX PACK and E M

0.67

Correlation Coefficient

EX PACK  E M

Poor diversification

The 3 months correlation between PACKN0000 and EMLN0000 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding EX PACK RUGATED CARTONS and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and EX PACK 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 EX PACK RUGATED CARTONS are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of EX PACK i.e., EX PACK and E M go up and down completely randomly.

Pair Corralation between EX PACK and E M

Assuming the 90 days trading horizon EX PACK RUGATED CARTONS is expected to generate 0.43 times more return on investment than E M. However, EX PACK RUGATED CARTONS is 2.32 times less risky than E M. It trades about 0.44 of its potential returns per unit of risk. E M L is currently generating about 0.14 per unit of risk. If you would invest  1,380  in EX PACK RUGATED CARTONS on September 24, 2024 and sell it today you would earn a total of  270.00  from holding EX PACK RUGATED CARTONS or generate 19.57% return on investment over 90 days.

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

EX PACK RUGATED CARTONS  vs.  E M L

EX PACK RUGATED

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EX PACK RUGATED CARTONS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EX PACK sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EX PACK and E M

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

The idea behind EX PACK RUGATED CARTONS and E M L 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.