Correlation Between Graphic Packaging and Smurfit Kappa

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

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

Diversification Opportunities for Graphic Packaging and Smurfit Kappa

0.54

Correlation Coefficient

Graphic Packaging  Smurfit Kappa

Very weak diversification

The 3 months correlation between Graphic and Smurfit is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Graphic Packaging Holding and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group and Graphic Packaging 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 Graphic Packaging Holding are associated (or correlated) with Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of Graphic Packaging i.e., Graphic Packaging and Smurfit Kappa go up and down completely randomly.

Pair Corralation between Graphic Packaging and Smurfit Kappa

Assuming the 90 days horizon Graphic Packaging Holding is expected to under-perform the Smurfit Kappa. But the stock apears to be less risky and, when comparing its historical volatility, Graphic Packaging Holding is 1.36 times less risky than Smurfit Kappa. The stock trades about -0.32 of its potential returns per unit of risk. The Smurfit Kappa Group is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  5,390  in Smurfit Kappa Group on September 23, 2024 and sell it today you would lose (410.00) from holding Smurfit Kappa Group or give up 7.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Graphic Packaging Holding  vs.  Smurfit Kappa Group

Graphic Packaging Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphic Packaging Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Graphic Packaging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Smurfit Kappa Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graphic Packaging and Smurfit Kappa

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

The idea behind Graphic Packaging Holding and Smurfit Kappa Group 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.