Correlation Between Smurfit Kappa and Amcor Plc

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

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

Diversification Opportunities for Smurfit Kappa and Amcor Plc

0.45

Correlation Coefficient

Smurfit Kappa  Amcor Plc

Very weak diversification

The 3 months correlation between Smurfit and Amcor is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and Amcor plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcor plc and Smurfit Kappa 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 Smurfit Kappa Group are associated (or correlated) with Amcor Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcor plc has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and Amcor Plc go up and down completely randomly.

Pair Corralation between Smurfit Kappa and Amcor Plc

Assuming the 90 days horizon Smurfit Kappa Group is expected to generate 1.66 times more return on investment than Amcor Plc. However, Smurfit Kappa is 1.66 times more volatile than Amcor plc. It trades about 0.02 of its potential returns per unit of risk. Amcor plc is currently generating about -0.07 per unit of risk. If you would invest  5,028  in Smurfit Kappa Group on November 28, 2024 and sell it today you would earn a total of  82.00  from holding Smurfit Kappa Group or generate 1.63% return on investment over 90 days.

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

Smurfit Kappa Group  vs.  Amcor plc

Smurfit Kappa Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Smurfit Kappa is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Amcor plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amcor plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Amcor Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Smurfit Kappa and Amcor Plc

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

The idea behind Smurfit Kappa Group and Amcor plc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.