Correlation Between Packaging Corp and Smurfit Kappa

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

Diversification Opportunities for Packaging Corp and Smurfit Kappa

0.75

Correlation Coefficient

Packaging Corp  Smurfit Kappa

Poor diversification

The 3 months correlation between Packaging and Smurfit is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group 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 Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of Packaging Corp i.e., Packaging Corp and Smurfit Kappa go up and down completely randomly.

Pair Corralation between Packaging Corp and Smurfit Kappa

Considering the 90-day investment horizon Packaging Corp of is expected to generate 0.77 times more return on investment than Smurfit Kappa. However, Packaging Corp of is 1.31 times less risky than Smurfit Kappa. It trades about -0.11 of its potential returns per unit of risk. Smurfit Kappa Group is currently generating about -0.12 per unit of risk. If you would invest  22,350  in Packaging Corp of on December 30, 2024 and sell it today you would lose (2,800) from holding Packaging Corp of or give up 12.53% 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.  Smurfit Kappa Group

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.

Smurfit Kappa Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smurfit Kappa Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Packaging Corp and Smurfit Kappa

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

The idea behind Packaging Corp of and Smurfit Kappa Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.