Correlation Between Sealed Air and Alliance Recovery

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

By analyzing existing cross correlation between Sealed Air and Alliance Recovery, you can compare the effects of market volatilities on Sealed Air and Alliance Recovery 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 Alliance Recovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and Alliance Recovery.

Diversification Opportunities for Sealed Air and Alliance Recovery

0.16

Correlation Coefficient

Sealed Air  Alliance Recovery

Average diversification

The 3 months correlation between Sealed and Alliance is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and Alliance Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Recovery 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 Alliance Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Recovery has no effect on the direction of Sealed Air i.e., Sealed Air and Alliance Recovery go up and down completely randomly.

Pair Corralation between Sealed Air and Alliance Recovery

Considering the 90-day investment horizon Sealed Air is expected to generate 0.42 times more return on investment than Alliance Recovery. However, Sealed Air is 2.39 times less risky than Alliance Recovery. It trades about 0.08 of its potential returns per unit of risk. Alliance Recovery is currently generating about -0.02 per unit of risk. If you would invest  3,375  in Sealed Air on September 14, 2024 and sell it today you would earn a total of  260.00  from holding Sealed Air or generate 7.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sealed Air  vs.  Alliance Recovery

Sealed Air

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Sealed Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alliance Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Alliance Recovery is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sealed Air and Alliance Recovery

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

The idea behind Sealed Air and Alliance Recovery 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.