Correlation Between Smurfit WestRock and Ardagh Metal

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

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

Diversification Opportunities for Smurfit WestRock and Ardagh Metal

0.82

Correlation Coefficient

Smurfit WestRock  Ardagh Metal

Very poor diversification

The 3 months correlation between Smurfit and Ardagh is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc and Ardagh Metal Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardagh Metal Packaging and Smurfit WestRock 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 WestRock plc are associated (or correlated) with Ardagh Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardagh Metal Packaging has no effect on the direction of Smurfit WestRock i.e., Smurfit WestRock and Ardagh Metal go up and down completely randomly.

Pair Corralation between Smurfit WestRock and Ardagh Metal

Allowing for the 90-day total investment horizon Smurfit WestRock is expected to generate 1.35 times less return on investment than Ardagh Metal. In addition to that, Smurfit WestRock is 1.21 times more volatile than Ardagh Metal Packaging. It trades about 0.07 of its total potential returns per unit of risk. Ardagh Metal Packaging is currently generating about 0.12 per unit of volatility. If you would invest  327.00  in Ardagh Metal Packaging on July 1, 2024 and sell it today you would earn a total of  47.00  from holding Ardagh Metal Packaging or generate 14.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Smurfit WestRock plc  vs.  Ardagh Metal Packaging

Smurfit WestRock plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit WestRock plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Smurfit WestRock may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Ardagh Metal Packaging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ardagh Metal Packaging are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, Ardagh Metal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smurfit WestRock and Ardagh Metal

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

The idea behind Smurfit WestRock plc and Ardagh Metal Packaging 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.