Correlation Between Packagingof America and Auto Trader

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

By analyzing existing cross correlation between Packaging of and Auto Trader Group, you can compare the effects of market volatilities on Packagingof America and Auto Trader 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 Packagingof America with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packagingof America and Auto Trader.

Diversification Opportunities for Packagingof America and Auto Trader

-0.57

Correlation Coefficient

Packagingof America  Auto Trader

Excellent diversification

The 3 months correlation between Packagingof and Auto is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Packaging of and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Packagingof America 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 Packaging of are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Packagingof America i.e., Packagingof America and Auto Trader go up and down completely randomly.

Pair Corralation between Packagingof America and Auto Trader

Assuming the 90 days horizon Packaging of is expected to generate 0.91 times more return on investment than Auto Trader. However, Packaging of is 1.1 times less risky than Auto Trader. It trades about 0.1 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.06 per unit of risk. If you would invest  11,523  in Packaging of on October 8, 2024 and sell it today you would earn a total of  10,317  from holding Packaging of or generate 89.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Packaging of  vs.  Auto Trader Group

Packagingof America

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Packagingof America reported solid returns over the last few months and may actually be approaching a breakup point.

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Packagingof America and Auto Trader

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

The idea behind Packaging of and Auto Trader 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.