Correlation Between Sonoco Products and Graphic Packaging

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

By analyzing existing cross correlation between Sonoco Products and Graphic Packaging Holding, you can compare the effects of market volatilities on Sonoco Products and Graphic Packaging 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 Graphic Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonoco Products and Graphic Packaging.

Diversification Opportunities for Sonoco Products and Graphic Packaging

0.5

Correlation Coefficient

Sonoco Products  Graphic Packaging

Very weak diversification

The 3 months correlation between Sonoco and Graphic is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sonoco Products and Graphic Packaging Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphic Packaging Holding 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 Graphic Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphic Packaging Holding has no effect on the direction of Sonoco Products i.e., Sonoco Products and Graphic Packaging go up and down completely randomly.

Pair Corralation between Sonoco Products and Graphic Packaging

Considering the 90-day investment horizon Sonoco Products is expected to under-perform the Graphic Packaging. But the stock apears to be less risky and, when comparing its historical volatility, Sonoco Products is 1.47 times less risky than Graphic Packaging. The stock trades about -0.09 of its potential returns per unit of risk. The Graphic Packaging Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,922  in Graphic Packaging Holding on September 2, 2024 and sell it today you would earn a total of  87.00  from holding Graphic Packaging Holding or generate 2.98% return on investment over 90 days.

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

Sonoco Products  vs.  Graphic Packaging Holding

Sonoco Products

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Sonoco Products is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Graphic Packaging Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Graphic Packaging Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Graphic Packaging is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sonoco Products and Graphic Packaging

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

The idea behind Sonoco Products and Graphic Packaging Holding 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.