Correlation Between CCL Industries and Simpson Manufacturing

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

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

Diversification Opportunities for CCL Industries and Simpson Manufacturing

0.04

Correlation Coefficient

CCL Industries  Simpson Manufacturing

Significant diversification

The 3 months correlation between CCL and Simpson is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries and Simpson Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simpson Manufacturing and CCL Industries 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 CCL Industries are associated (or correlated) with Simpson Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simpson Manufacturing has no effect on the direction of CCL Industries i.e., CCL Industries and Simpson Manufacturing go up and down completely randomly.

Pair Corralation between CCL Industries and Simpson Manufacturing

Assuming the 90 days horizon CCL Industries is expected to generate 9.61 times less return on investment than Simpson Manufacturing. But when comparing it to its historical volatility, CCL Industries is 1.5 times less risky than Simpson Manufacturing. It trades about 0.03 of its potential returns per unit of risk. Simpson Manufacturing is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  15,262  in Simpson Manufacturing on May 28, 2025 and sell it today you would earn a total of  4,251  from holding Simpson Manufacturing or generate 27.85% return on investment over 90 days.

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

CCL Industries  vs.  Simpson Manufacturing

CCL Industries

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in CCL Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, CCL Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Simpson Manufacturing

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simpson Manufacturing are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Simpson Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CCL Industries and Simpson Manufacturing

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

The idea behind CCL Industries and Simpson Manufacturing 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.