Correlation Between Smurfit Kappa and MULTI CHEM

Can any of the company-specific risk be diversified away by investing in both Smurfit Kappa and MULTI CHEM 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 MULTI CHEM 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 MULTI CHEM LTD, you can compare the effects of market volatilities on Smurfit Kappa and MULTI CHEM 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 MULTI CHEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit Kappa and MULTI CHEM.

Diversification Opportunities for Smurfit Kappa and MULTI CHEM

0.46

Correlation Coefficient

Smurfit Kappa  MULTI CHEM

Very weak diversification

The 3 months correlation between Smurfit and MULTI is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and MULTI CHEM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MULTI CHEM LTD 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 MULTI CHEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MULTI CHEM LTD has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and MULTI CHEM go up and down completely randomly.

Pair Corralation between Smurfit Kappa and MULTI CHEM

Assuming the 90 days horizon Smurfit Kappa Group is expected to under-perform the MULTI CHEM. But the stock apears to be less risky and, when comparing its historical volatility, Smurfit Kappa Group is 1.62 times less risky than MULTI CHEM. The stock trades about -0.22 of its potential returns per unit of risk. The MULTI CHEM LTD is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  196.00  in MULTI CHEM LTD on September 23, 2024 and sell it today you would lose (10.00) from holding MULTI CHEM LTD or give up 5.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Smurfit Kappa Group  vs.  MULTI CHEM LTD

Smurfit Kappa Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

MULTI CHEM LTD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MULTI CHEM LTD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MULTI CHEM 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 MULTI CHEM

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

The idea behind Smurfit Kappa Group and MULTI CHEM LTD 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 Stocks Directory module to find actively traded stocks across global markets.