Correlation Between Sovereign Metals and Sealed Air

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

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

Diversification Opportunities for Sovereign Metals and Sealed Air

0.28

Correlation Coefficient

Sovereign Metals  Sealed Air

Modest diversification

The 3 months correlation between Sovereign and Sealed is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals and Sealed Air Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air Corp and Sovereign Metals 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 Sovereign Metals are associated (or correlated) with Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air Corp has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and Sealed Air go up and down completely randomly.

Pair Corralation between Sovereign Metals and Sealed Air

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 1.11 times more return on investment than Sealed Air. However, Sovereign Metals is 1.11 times more volatile than Sealed Air Corp. It trades about 0.09 of its potential returns per unit of risk. Sealed Air Corp is currently generating about -0.29 per unit of risk. If you would invest  3,800  in Sovereign Metals on October 16, 2024 and sell it today you would earn a total of  100.00  from holding Sovereign Metals or generate 2.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Sovereign Metals  vs.  Sealed Air Corp

Sovereign Metals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sovereign Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sealed Air Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sealed Air Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sealed Air is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sovereign Metals and Sealed Air

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

The idea behind Sovereign Metals and Sealed Air Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.