Correlation Between Sealed Air and Associated British

Can any of the company-specific risk be diversified away by investing in both Sealed Air and Associated British 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 Sealed Air and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sealed Air and Associated British

0.07

Correlation Coefficient

Sealed Air  Associated British

Significant diversification

The 3 months correlation between Sealed and Associated is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air Corp and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Sealed Air 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 Sealed Air Corp are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Sealed Air i.e., Sealed Air and Associated British go up and down completely randomly.

Pair Corralation between Sealed Air and Associated British

Assuming the 90 days trading horizon Sealed Air Corp is expected to generate 1.14 times more return on investment than Associated British. However, Sealed Air is 1.14 times more volatile than Associated British Foods. It trades about -0.03 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.1 per unit of risk. If you would invest  3,526  in Sealed Air Corp on September 23, 2024 and sell it today you would lose (110.00) from holding Sealed Air Corp or give up 3.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.94%
Values	Daily Returns

Sealed Air Corp  vs.  Associated British Foods

Sealed Air Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sealed Air Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sealed Air is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sealed Air and Associated British

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

The idea behind Sealed Air Corp and Associated British Foods 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.