Correlation Between Ardagh and Tapestry

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

By analyzing existing cross correlation between Ardagh Packaging Finance and Tapestry, you can compare the effects of market volatilities on Ardagh and Tapestry 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 Ardagh with a short position of Tapestry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ardagh and Tapestry.

Diversification Opportunities for Ardagh and Tapestry

-0.67

Correlation Coefficient

Ardagh  Tapestry

Excellent diversification

The 3 months correlation between Ardagh and Tapestry is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ardagh Packaging Finance and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry and Ardagh 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 Ardagh Packaging Finance are associated (or correlated) with Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Ardagh i.e., Ardagh and Tapestry go up and down completely randomly.

Pair Corralation between Ardagh and Tapestry

Assuming the 90 days trading horizon Ardagh Packaging Finance is expected to generate 2.77 times more return on investment than Tapestry. However, Ardagh is 2.77 times more volatile than Tapestry. It trades about 0.06 of its potential returns per unit of risk. Tapestry is currently generating about 0.09 per unit of risk. If you would invest  5,704  in Ardagh Packaging Finance on December 23, 2024 and sell it today you would earn a total of  342.00  from holding Ardagh Packaging Finance or generate 6.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	42.62%
Values	Daily Returns

Ardagh Packaging Finance  vs.  Tapestry

Ardagh Packaging Finance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ardagh Packaging Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Ardagh sustained solid returns over the last few months and may actually be approaching a breakup point.

Tapestry

Risk-Adjusted Performance

OK

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

Pair Trading with Ardagh and Tapestry

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

The idea behind Ardagh Packaging Finance and Tapestry 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.