Correlation Between Packaging Corp and NEXE Innovations

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

Diversification Opportunities for Packaging Corp and NEXE Innovations

0.35

Correlation Coefficient

Packaging Corp  NEXE Innovations

Weak diversification

The 3 months correlation between Packaging and NEXE is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of and NEXE Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXE Innovations 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 NEXE Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXE Innovations has no effect on the direction of Packaging Corp i.e., Packaging Corp and NEXE Innovations go up and down completely randomly.

Pair Corralation between Packaging Corp and NEXE Innovations

Considering the 90-day investment horizon Packaging Corp of is expected to generate 0.14 times more return on investment than NEXE Innovations. However, Packaging Corp of is 7.08 times less risky than NEXE Innovations. It trades about 0.39 of its potential returns per unit of risk. NEXE Innovations is currently generating about -0.07 per unit of risk. If you would invest  22,708  in Packaging Corp of on October 22, 2024 and sell it today you would earn a total of  1,079  from holding Packaging Corp of or generate 4.75% return on investment over 90 days.

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

Packaging Corp of  vs.  NEXE Innovations

Packaging Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging Corp of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Packaging Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NEXE Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXE Innovations 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 Corp and NEXE Innovations

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

The idea behind Packaging Corp of and NEXE Innovations 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.