Correlation Between Ardagh Metal and Karat Packaging

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

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

Diversification Opportunities for Ardagh Metal and Karat Packaging

-0.23

Correlation Coefficient

Ardagh Metal  Karat Packaging

Very good diversification

The 3 months correlation between Ardagh and Karat is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ardagh Metal Packaging and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging and Ardagh Metal 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 Ardagh Metal Packaging are associated (or correlated) with Karat Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karat Packaging has no effect on the direction of Ardagh Metal i.e., Ardagh Metal and Karat Packaging go up and down completely randomly.

Pair Corralation between Ardagh Metal and Karat Packaging

Given the investment horizon of 90 days Ardagh Metal Packaging is expected to under-perform the Karat Packaging. In addition to that, Ardagh Metal is 1.39 times more volatile than Karat Packaging. It trades about -0.23 of its total potential returns per unit of risk. Karat Packaging is currently generating about 0.19 per unit of volatility. If you would invest  3,021  in Karat Packaging on September 14, 2024 and sell it today you would earn a total of  187.00  from holding Karat Packaging or generate 6.19% return on investment over 90 days.

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

Ardagh Metal Packaging  vs.  Karat Packaging

Ardagh Metal Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardagh Metal Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Karat Packaging

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Karat Packaging are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Karat Packaging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ardagh Metal and Karat Packaging

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

The idea behind Ardagh Metal Packaging and Karat 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.