Correlation Between Pactiv Evergreen and Avery Dennison

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

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

Diversification Opportunities for Pactiv Evergreen and Avery Dennison

-0.5

Correlation Coefficient

Pactiv Evergreen  Avery Dennison

Very good diversification

The 3 months correlation between Pactiv and Avery is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Pactiv Evergreen and Avery Dennison Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison Corp and Pactiv Evergreen 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 Pactiv Evergreen are associated (or correlated) with Avery Dennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avery Dennison Corp has no effect on the direction of Pactiv Evergreen i.e., Pactiv Evergreen and Avery Dennison go up and down completely randomly.

Pair Corralation between Pactiv Evergreen and Avery Dennison

Given the investment horizon of 90 days Pactiv Evergreen is expected to generate 1.83 times more return on investment than Avery Dennison. However, Pactiv Evergreen is 1.83 times more volatile than Avery Dennison Corp. It trades about 0.13 of its potential returns per unit of risk. Avery Dennison Corp is currently generating about -0.07 per unit of risk. If you would invest  1,135  in Pactiv Evergreen on September 4, 2024 and sell it today you would earn a total of  225.00  from holding Pactiv Evergreen or generate 19.82% return on investment over 90 days.

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

Pactiv Evergreen  vs.  Avery Dennison Corp

Pactiv Evergreen

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pactiv Evergreen are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Pactiv Evergreen exhibited solid returns over the last few months and may actually be approaching a breakup point.

Avery Dennison Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avery Dennison Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Avery Dennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pactiv Evergreen and Avery Dennison

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

The idea behind Pactiv Evergreen and Avery Dennison Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.