Correlation Between Sealed Air and Mills Music

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

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

Diversification Opportunities for Sealed Air and Mills Music

0.44

Correlation Coefficient

Sealed Air  Mills Music

Very weak diversification

The 3 months correlation between Sealed and Mills is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and Mills Music Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mills Music Trust 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 Mills Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mills Music Trust has no effect on the direction of Sealed Air i.e., Sealed Air and Mills Music go up and down completely randomly.

Pair Corralation between Sealed Air and Mills Music

Considering the 90-day investment horizon Sealed Air is expected to under-perform the Mills Music. But the stock apears to be less risky and, when comparing its historical volatility, Sealed Air is 1.16 times less risky than Mills Music. The stock trades about -0.22 of its potential returns per unit of risk. The Mills Music Trust is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,700  in Mills Music Trust on September 25, 2024 and sell it today you would lose (100.00) from holding Mills Music Trust or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Sealed Air  vs.  Mills Music Trust

Sealed Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Mills Music Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mills Music Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mills Music is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sealed Air and Mills Music

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

The idea behind Sealed Air and Mills Music Trust 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.