Correlation Between Reynolds Consumer and Pactiv Evergreen

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

Diversification Opportunities for Reynolds Consumer and Pactiv Evergreen

-0.7

Correlation Coefficient

Reynolds Consumer  Pactiv Evergreen

Excellent diversification

The 3 months correlation between Reynolds and Pactiv is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Reynolds Consumer Products and Pactiv Evergreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pactiv Evergreen 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 Pactiv Evergreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pactiv Evergreen has no effect on the direction of Reynolds Consumer i.e., Reynolds Consumer and Pactiv Evergreen go up and down completely randomly.

Pair Corralation between Reynolds Consumer and Pactiv Evergreen

Given the investment horizon of 90 days Reynolds Consumer Products is expected to under-perform the Pactiv Evergreen. In addition to that, Reynolds Consumer is 7.3 times more volatile than Pactiv Evergreen. It trades about -0.1 of its total potential returns per unit of risk. Pactiv Evergreen is currently generating about 0.19 per unit of volatility. If you would invest  1,748  in Pactiv Evergreen on December 29, 2024 and sell it today you would earn a total of  48.00  from holding Pactiv Evergreen or generate 2.75% return on investment over 90 days.

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

Reynolds Consumer Products  vs.  Pactiv Evergreen

Reynolds Consumer

Risk-Adjusted Performance

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 weak 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.

Pactiv Evergreen

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pactiv Evergreen are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Pactiv Evergreen is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Reynolds Consumer and Pactiv Evergreen

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

The idea behind Reynolds Consumer Products and Pactiv Evergreen 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.