Correlation Between Sonoco Products and Greif Bros

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

By analyzing existing cross correlation between Sonoco Products and Greif Bros, you can compare the effects of market volatilities on Sonoco Products and Greif Bros 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 Sonoco Products with a short position of Greif Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonoco Products and Greif Bros.

Diversification Opportunities for Sonoco Products and Greif Bros

0.87

Correlation Coefficient

Sonoco Products  Greif Bros

Very poor diversification

The 3 months correlation between Sonoco and Greif is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sonoco Products and Greif Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greif Bros and Sonoco Products 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 Sonoco Products are associated (or correlated) with Greif Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greif Bros has no effect on the direction of Sonoco Products i.e., Sonoco Products and Greif Bros go up and down completely randomly.

Pair Corralation between Sonoco Products and Greif Bros

Considering the 90-day investment horizon Sonoco Products is expected to under-perform the Greif Bros. In addition to that, Sonoco Products is 1.16 times more volatile than Greif Bros. It trades about -0.16 of its total potential returns per unit of risk. Greif Bros is currently generating about -0.17 per unit of volatility. If you would invest  6,245  in Greif Bros on November 28, 2024 and sell it today you would lose (264.00) from holding Greif Bros or give up 4.23% of portfolio value over 90 days.

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

Sonoco Products  vs.  Greif Bros

Sonoco Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonoco Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Greif Bros

Risk-Adjusted Performance

Very Weak

Over the last 90 days Greif Bros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sonoco Products and Greif Bros

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

The idea behind Sonoco Products and Greif Bros 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.