Correlation Between Smurfit Kappa and Packaging Corp

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Can any of the company-specific risk be diversified away by investing in both Smurfit Kappa and Packaging Corp 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 Kappa and Packaging Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smurfit Kappa Group and Packaging Corp, you can compare the effects of market volatilities on Smurfit Kappa and Packaging Corp 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 Kappa with a short position of Packaging Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit Kappa and Packaging Corp.

Diversification Opportunities for Smurfit Kappa and Packaging Corp

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Smurfit and Packaging is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and Packaging Corp Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packaging Corp and Smurfit Kappa 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 Kappa Group are associated (or correlated) with Packaging Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packaging Corp has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and Packaging Corp go up and down completely randomly.

Pair Corralation between Smurfit Kappa and Packaging Corp

Assuming the 90 days horizon Smurfit Kappa Group is expected to generate 1.31 times more return on investment than Packaging Corp. However, Smurfit Kappa is 1.31 times more volatile than Packaging Corp. It trades about 0.3 of its potential returns per unit of risk. Packaging Corp is currently generating about 0.35 per unit of risk. If you would invest  4,100  in Smurfit Kappa Group on December 30, 2023 and sell it today you would earn a total of  385.00  from holding Smurfit Kappa Group or generate 9.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Smurfit Kappa Group  vs.  Packaging Corp Of

 Performance 
       Timeline  
Smurfit Kappa Group 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.
Packaging Corp 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Packaging Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Packaging Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Smurfit Kappa and Packaging Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Smurfit Kappa and Packaging Corp

The main advantage of trading using opposite Smurfit Kappa and Packaging Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smurfit Kappa position performs unexpectedly, Packaging Corp 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 Packaging Corp will offset losses from the drop in Packaging Corp's long position.
The idea behind Smurfit Kappa Group and Packaging Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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