Correlation Between Ardagh Metal and Crown Holdings

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

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

Diversification Opportunities for Ardagh Metal and Crown Holdings

0.83

Correlation Coefficient

Ardagh Metal  Crown Holdings

Very poor diversification

The 3 months correlation between Ardagh and Crown is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ardagh Metal Packaging and Crown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Holdings and Ardagh Metal 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 Metal Packaging are associated (or correlated) with Crown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Holdings has no effect on the direction of Ardagh Metal i.e., Ardagh Metal and Crown Holdings go up and down completely randomly.

Pair Corralation between Ardagh Metal and Crown Holdings

Given the investment horizon of 90 days Ardagh Metal is expected to generate 1.22 times less return on investment than Crown Holdings. In addition to that, Ardagh Metal is 1.55 times more volatile than Crown Holdings. It trades about 0.01 of its total potential returns per unit of risk. Crown Holdings is currently generating about 0.02 per unit of volatility. If you would invest  7,903  in Crown Holdings on August 19, 2024 and sell it today you would earn a total of  1,083  from holding Crown Holdings or generate 13.7% return on investment over 90 days.

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

Ardagh Metal Packaging  vs.  Crown Holdings

Ardagh Metal Packaging

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ardagh Metal Packaging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Ardagh Metal may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Crown Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Crown Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ardagh Metal and Crown Holdings

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

The idea behind Ardagh Metal Packaging and Crown Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.