Correlation Between Smurfit WestRock and Sonoco Products

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

Diversification Opportunities for Smurfit WestRock and Sonoco Products

-0.6

Correlation Coefficient

Smurfit WestRock  Sonoco Products

Excellent diversification

The 3 months correlation between Smurfit and Sonoco is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc and Sonoco Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonoco Products 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 Sonoco Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonoco Products has no effect on the direction of Smurfit WestRock i.e., Smurfit WestRock and Sonoco Products go up and down completely randomly.

Pair Corralation between Smurfit WestRock and Sonoco Products

Allowing for the 90-day total investment horizon Smurfit WestRock plc is expected to generate 2.39 times more return on investment than Sonoco Products. However, Smurfit WestRock is 2.39 times more volatile than Sonoco Products. It trades about 0.05 of its potential returns per unit of risk. Sonoco Products is currently generating about -0.01 per unit of risk. If you would invest  3,762  in Smurfit WestRock plc on September 21, 2024 and sell it today you would earn a total of  1,489  from holding Smurfit WestRock plc or generate 39.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	69.09%
Values	Daily Returns

Smurfit WestRock plc  vs.  Sonoco Products

Smurfit WestRock plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit WestRock plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Smurfit WestRock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Smurfit WestRock and Sonoco Products

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

The idea behind Smurfit WestRock plc and Sonoco Products 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.