Correlation Between Packaging and Crown Holdings

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

By analyzing existing cross correlation between Packaging of and Crown Holdings, you can compare the effects of market volatilities on Packaging and Crown Holdings 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 Crown Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packaging and Crown Holdings.

Diversification Opportunities for Packaging and Crown Holdings

0.15

Correlation Coefficient

Packaging  Crown Holdings

Average diversification

The 3 months correlation between Packaging and Crown is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Packaging of and Crown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Holdings 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 Crown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Holdings has no effect on the direction of Packaging i.e., Packaging and Crown Holdings go up and down completely randomly.

Pair Corralation between Packaging and Crown Holdings

Assuming the 90 days horizon Packaging of is expected to generate 0.97 times more return on investment than Crown Holdings. However, Packaging of is 1.04 times less risky than Crown Holdings. It trades about 0.18 of its potential returns per unit of risk. Crown Holdings is currently generating about -0.08 per unit of risk. If you would invest  18,976  in Packaging of on September 26, 2024 and sell it today you would earn a total of  2,794  from holding Packaging of or generate 14.72% return on investment over 90 days.

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

Packaging of  vs.  Crown Holdings

Packaging

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging of are ranked lower than 14 (%) 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.

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings 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 Crown Holdings

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

The idea behind Packaging of and Crown Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.