Correlation Between Smurfit WestRock and Retailing Fund

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

Diversification Opportunities for Smurfit WestRock and Retailing Fund

0.58

Correlation Coefficient

Smurfit WestRock  Retailing Fund

Very weak diversification

The 3 months correlation between Smurfit and Retailing is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc and Retailing Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailing Fund Class 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 Retailing Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailing Fund Class has no effect on the direction of Smurfit WestRock i.e., Smurfit WestRock and Retailing Fund go up and down completely randomly.

Pair Corralation between Smurfit WestRock and Retailing Fund

Allowing for the 90-day total investment horizon Smurfit WestRock plc is expected to generate 2.6 times more return on investment than Retailing Fund. However, Smurfit WestRock is 2.6 times more volatile than Retailing Fund Class. It trades about 0.15 of its potential returns per unit of risk. Retailing Fund Class is currently generating about 0.13 per unit of risk. If you would invest  4,556  in Smurfit WestRock plc on October 25, 2024 and sell it today you would earn a total of  979.00  from holding Smurfit WestRock plc or generate 21.49% return on investment over 90 days.

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

Smurfit WestRock plc  vs.  Retailing Fund Class

Smurfit WestRock plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit WestRock plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Smurfit WestRock showed solid returns over the last few months and may actually be approaching a breakup point.

Retailing Fund Class

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Retailing Fund Class are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Retailing Fund may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Smurfit WestRock and Retailing Fund

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

The idea behind Smurfit WestRock plc and Retailing Fund Class 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.