Correlation Between Packaging Corp and Canoo Holdings

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

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

Diversification Opportunities for Packaging Corp and Canoo Holdings

-0.9

Correlation Coefficient

Packaging Corp  Canoo Holdings

Pay attention - limited upside

The 3 months correlation between Packaging and Canoo is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of and Canoo Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoo Holdings and Packaging Corp 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 Corp of are associated (or correlated) with Canoo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoo Holdings has no effect on the direction of Packaging Corp i.e., Packaging Corp and Canoo Holdings go up and down completely randomly.

Pair Corralation between Packaging Corp and Canoo Holdings

Considering the 90-day investment horizon Packaging Corp of is expected to generate 0.12 times more return on investment than Canoo Holdings. However, Packaging Corp of is 8.4 times less risky than Canoo Holdings. It trades about 0.24 of its potential returns per unit of risk. Canoo Holdings is currently generating about -0.08 per unit of risk. If you would invest  20,829  in Packaging Corp of on August 30, 2024 and sell it today you would earn a total of  3,874  from holding Packaging Corp of or generate 18.6% return on investment over 90 days.

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

Packaging Corp of  vs.  Canoo Holdings

Packaging Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging Corp of are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Packaging Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Canoo Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canoo Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Packaging Corp and Canoo Holdings

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

The idea behind Packaging Corp of and Canoo 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.