Correlation Between Smurfit WestRock and Leisure Portfolio

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

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

Diversification Opportunities for Smurfit WestRock and Leisure Portfolio

0.51

Correlation Coefficient

Smurfit WestRock  Leisure Portfolio

Very weak diversification

The 3 months correlation between Smurfit and Leisure is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc and Leisure Portfolio Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Portfolio Leisure and Smurfit WestRock 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 WestRock plc are associated (or correlated) with Leisure Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Portfolio Leisure has no effect on the direction of Smurfit WestRock i.e., Smurfit WestRock and Leisure Portfolio go up and down completely randomly.

Pair Corralation between Smurfit WestRock and Leisure Portfolio

Allowing for the 90-day total investment horizon Smurfit WestRock plc is expected to under-perform the Leisure Portfolio. In addition to that, Smurfit WestRock is 1.94 times more volatile than Leisure Portfolio Leisure. It trades about -0.11 of its total potential returns per unit of risk. Leisure Portfolio Leisure is currently generating about -0.06 per unit of volatility. If you would invest  2,053  in Leisure Portfolio Leisure on December 30, 2024 and sell it today you would lose (95.00) from holding Leisure Portfolio Leisure or give up 4.63% of portfolio value over 90 days.

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

Smurfit WestRock plc  vs.  Leisure Portfolio Leisure

Smurfit WestRock plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smurfit WestRock plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Leisure Portfolio Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leisure Portfolio Leisure has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Leisure Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smurfit WestRock and Leisure Portfolio

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

The idea behind Smurfit WestRock plc and Leisure Portfolio Leisure 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.