Correlation Between Smurfit WestRock and Gap,

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

Diversification Opportunities for Smurfit WestRock and Gap,

0.49

Correlation Coefficient

Smurfit WestRock  Gap,

Very weak diversification

The 3 months correlation between Smurfit and Gap, is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Smurfit WestRock i.e., Smurfit WestRock and Gap, go up and down completely randomly.

Pair Corralation between Smurfit WestRock and Gap,

Allowing for the 90-day total investment horizon Smurfit WestRock plc is expected to generate 0.84 times more return on investment than Gap,. However, Smurfit WestRock plc is 1.19 times less risky than Gap,. It trades about 0.08 of its potential returns per unit of risk. The Gap, is currently generating about 0.05 per unit of risk. If you would invest  3,974  in Smurfit WestRock plc on October 24, 2024 and sell it today you would earn a total of  1,561  from holding Smurfit WestRock plc or generate 39.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.71%
Values	Daily Returns

Smurfit WestRock plc  vs.  The Gap,

Smurfit WestRock plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit WestRock plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Smurfit WestRock showed solid returns over the last few months and may actually be approaching a breakup point.

Gap,

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smurfit WestRock and Gap,

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

The idea behind Smurfit WestRock plc and The Gap, 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.