Correlation Between Alfa Holdings and Avery Dennison

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

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

Diversification Opportunities for Alfa Holdings and Avery Dennison

-0.7

Correlation Coefficient

Alfa Holdings  Avery Dennison

Excellent diversification

The 3 months correlation between Alfa and Avery is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Holdings SA and Avery Dennison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison and Alfa Holdings 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 Alfa Holdings SA 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 has no effect on the direction of Alfa Holdings i.e., Alfa Holdings and Avery Dennison go up and down completely randomly.

Pair Corralation between Alfa Holdings and Avery Dennison

Assuming the 90 days trading horizon Alfa Holdings SA is expected to under-perform the Avery Dennison. In addition to that, Alfa Holdings is 83.4 times more volatile than Avery Dennison. It trades about -0.22 of its total potential returns per unit of risk. Avery Dennison is currently generating about 0.13 per unit of volatility. If you would invest  57,767  in Avery Dennison on October 4, 2024 and sell it today you would earn a total of  175.00  from holding Avery Dennison or generate 0.3% return on investment over 90 days.

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

Alfa Holdings SA  vs.  Avery Dennison

Alfa Holdings SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Avery Dennison

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avery Dennison are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Avery Dennison is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alfa Holdings and Avery Dennison

The main advantage of trading using opposite Alfa Holdings and Avery Dennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Holdings 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 Alfa Holdings SA and Avery Dennison 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.