Correlation Between Sealed Air and Scholastic

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

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

Diversification Opportunities for Sealed Air and Scholastic

0.08

Correlation Coefficient

Sealed Air  Scholastic

Significant diversification

The 3 months correlation between Sealed and Scholastic is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and Scholastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholastic 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 Scholastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholastic has no effect on the direction of Sealed Air i.e., Sealed Air and Scholastic go up and down completely randomly.

Pair Corralation between Sealed Air and Scholastic

Considering the 90-day investment horizon Sealed Air is expected to under-perform the Scholastic. But the stock apears to be less risky and, when comparing its historical volatility, Sealed Air is 1.9 times less risky than Scholastic. The stock trades about -0.12 of its potential returns per unit of risk. The Scholastic is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,060  in Scholastic on December 29, 2024 and sell it today you would lose (195.00) from holding Scholastic or give up 9.47% of portfolio value over 90 days.

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

Sealed Air  vs.  Scholastic

Sealed Air

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Scholastic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scholastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sealed Air and Scholastic

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

The idea behind Sealed Air and Scholastic 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.