Correlation Between Packaging and Amcor Plc

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

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

Diversification Opportunities for Packaging and Amcor Plc

-0.18

Correlation Coefficient

Packaging  Amcor Plc

Good diversification

The 3 months correlation between Packaging and Amcor is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Packaging of and Amcor plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcor plc and Packaging 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 Amcor Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcor plc has no effect on the direction of Packaging i.e., Packaging and Amcor Plc go up and down completely randomly.

Pair Corralation between Packaging and Amcor Plc

Assuming the 90 days horizon Packaging of is expected to generate 0.3 times more return on investment than Amcor Plc. However, Packaging of is 3.36 times less risky than Amcor Plc. It trades about -0.6 of its potential returns per unit of risk. Amcor plc is currently generating about -0.24 per unit of risk. If you would invest  23,356  in Packaging of on September 25, 2024 and sell it today you would lose (1,666) from holding Packaging of or give up 7.13% of portfolio value over 90 days.

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

Packaging of  vs.  Amcor plc

Packaging

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Packaging reported solid returns over the last few months and may actually be approaching a breakup point.

Amcor plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amcor plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Packaging and Amcor Plc

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

The idea behind Packaging of and Amcor plc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.