Correlation Between SEALED AIR and Transurban

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

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

Diversification Opportunities for SEALED AIR and Transurban

-0.66

Correlation Coefficient

SEALED AIR  Transurban

Excellent diversification

The 3 months correlation between SEALED and Transurban is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR and Transurban Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transurban Group and SEALED AIR 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 SEALED AIR are associated (or correlated) with Transurban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transurban Group has no effect on the direction of SEALED AIR i.e., SEALED AIR and Transurban go up and down completely randomly.

Pair Corralation between SEALED AIR and Transurban

Assuming the 90 days trading horizon SEALED AIR is expected to generate 1.55 times more return on investment than Transurban. However, SEALED AIR is 1.55 times more volatile than Transurban Group. It trades about 0.14 of its potential returns per unit of risk. Transurban Group is currently generating about -0.09 per unit of risk. If you would invest  2,943  in SEALED AIR on September 14, 2024 and sell it today you would earn a total of  457.00  from holding SEALED AIR or generate 15.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

SEALED AIR   vs.  Transurban Group

SEALED AIR

Risk-Adjusted Performance

10 of 100

OK

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

Transurban Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transurban Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SEALED AIR and Transurban

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

The idea behind SEALED AIR and Transurban Group 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.