Correlation Between Packaging Corp and Avery Dennison

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

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

Diversification Opportunities for Packaging Corp and Avery Dennison

0.19

Correlation Coefficient

Packaging Corp  Avery Dennison

Average diversification

The 3 months correlation between Packaging and Avery is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of and Avery Dennison Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison Corp and Packaging Corp 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 Packaging Corp of are associated (or correlated) with Avery Dennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avery Dennison Corp has no effect on the direction of Packaging Corp i.e., Packaging Corp and Avery Dennison go up and down completely randomly.

Pair Corralation between Packaging Corp and Avery Dennison

Considering the 90-day investment horizon Packaging Corp of is expected to generate 0.68 times more return on investment than Avery Dennison. However, Packaging Corp of is 1.47 times less risky than Avery Dennison. It trades about 0.16 of its potential returns per unit of risk. Avery Dennison Corp is currently generating about 0.03 per unit of risk. If you would invest  20,829  in Packaging Corp of on July 1, 2024 and sell it today you would earn a total of  741.00  from holding Packaging Corp of or generate 3.56% return on investment over 90 days.

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

Packaging Corp of  vs.  Avery Dennison Corp

Packaging Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging Corp of are ranked lower than 20 (%) 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.

Avery Dennison Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avery Dennison Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Avery Dennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Packaging Corp and Avery Dennison

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

The idea behind Packaging Corp of and Avery Dennison 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.