Correlation Between Richards Packaging and ATCO

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

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

Diversification Opportunities for Richards Packaging and ATCO

-0.17

Correlation Coefficient

Richards Packaging  ATCO

Good diversification

The 3 months correlation between Richards and ATCO is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Richards Packaging Income and ATCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATCO and Richards Packaging 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 Richards Packaging Income are associated (or correlated) with ATCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATCO has no effect on the direction of Richards Packaging i.e., Richards Packaging and ATCO go up and down completely randomly.

Pair Corralation between Richards Packaging and ATCO

Assuming the 90 days trading horizon Richards Packaging Income is expected to under-perform the ATCO. But the stock apears to be less risky and, when comparing its historical volatility, Richards Packaging Income is 1.67 times less risky than ATCO. The stock trades about 0.0 of its potential returns per unit of risk. The ATCO is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,601  in ATCO on September 2, 2024 and sell it today you would earn a total of  628.00  from holding ATCO or generate 13.65% return on investment over 90 days.

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

Richards Packaging Income  vs.  ATCO

Richards Packaging Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Richards Packaging Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Richards Packaging is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ATCO

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATCO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, ATCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richards Packaging and ATCO

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

The idea behind Richards Packaging Income and ATCO 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.