Correlation Between Reynolds Consumer and Ardagh Metal

Can any of the company-specific risk be diversified away by investing in both Reynolds Consumer and Ardagh Metal 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 Reynolds Consumer and Ardagh Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Reynolds Consumer and Ardagh Metal

0.37

Correlation Coefficient

Reynolds Consumer  Ardagh Metal

Weak diversification

The 3 months correlation between Reynolds and Ardagh is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Reynolds Consumer Products and Ardagh Metal Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardagh Metal Packaging and Reynolds Consumer 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 Reynolds Consumer Products are associated (or correlated) with Ardagh Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardagh Metal Packaging has no effect on the direction of Reynolds Consumer i.e., Reynolds Consumer and Ardagh Metal go up and down completely randomly.

Pair Corralation between Reynolds Consumer and Ardagh Metal

Given the investment horizon of 90 days Reynolds Consumer Products is expected to generate 0.39 times more return on investment than Ardagh Metal. However, Reynolds Consumer Products is 2.55 times less risky than Ardagh Metal. It trades about -0.05 of its potential returns per unit of risk. Ardagh Metal Packaging is currently generating about -0.31 per unit of risk. If you would invest  2,764  in Reynolds Consumer Products on September 21, 2024 and sell it today you would lose (25.00) from holding Reynolds Consumer Products or give up 0.9% of portfolio value over 90 days.

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

Reynolds Consumer Products  vs.  Ardagh Metal Packaging

Reynolds Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reynolds Consumer Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Ardagh Metal Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardagh Metal Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Reynolds Consumer and Ardagh Metal

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

The idea behind Reynolds Consumer Products and Ardagh Metal Packaging 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.