Correlation Between Packaging Corp and Graphic Packaging

Can any of the company-specific risk be diversified away by investing in both Packaging Corp and Graphic Packaging 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 Graphic Packaging 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 Graphic Packaging Holding, you can compare the effects of market volatilities on Packaging Corp and Graphic Packaging 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 Graphic Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packaging Corp and Graphic Packaging.

Diversification Opportunities for Packaging Corp and Graphic Packaging

0.68

Correlation Coefficient

Packaging Corp  Graphic Packaging

Poor diversification

The 3 months correlation between Packaging and Graphic is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of and Graphic Packaging Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphic Packaging Holding 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 Graphic Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphic Packaging Holding has no effect on the direction of Packaging Corp i.e., Packaging Corp and Graphic Packaging go up and down completely randomly.

Pair Corralation between Packaging Corp and Graphic Packaging

Considering the 90-day investment horizon Packaging Corp of is expected to under-perform the Graphic Packaging. In addition to that, Packaging Corp is 1.26 times more volatile than Graphic Packaging Holding. It trades about -0.1 of its total potential returns per unit of risk. Graphic Packaging Holding is currently generating about -0.03 per unit of volatility. If you would invest  2,701  in Graphic Packaging Holding on December 29, 2024 and sell it today you would lose (89.00) from holding Graphic Packaging Holding or give up 3.3% of portfolio value over 90 days.

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

Packaging Corp of  vs.  Graphic Packaging Holding

Packaging Corp

Risk-Adjusted Performance

Very Weak

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

Graphic Packaging Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Graphic Packaging Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Graphic Packaging is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Packaging Corp and Graphic Packaging

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

The idea behind Packaging Corp of and Graphic Packaging Holding 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.