Correlation Between Ardagh Metal and TriMas

Can any of the company-specific risk be diversified away by investing in both Ardagh Metal and TriMas 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 TriMas 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 TriMas, you can compare the effects of market volatilities on Ardagh Metal and TriMas 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 TriMas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ardagh Metal and TriMas.

Diversification Opportunities for Ardagh Metal and TriMas

0.6

Correlation Coefficient

Ardagh Metal  TriMas

Poor diversification

The 3 months correlation between Ardagh and TriMas is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ardagh Metal Packaging and TriMas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TriMas 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 TriMas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TriMas has no effect on the direction of Ardagh Metal i.e., Ardagh Metal and TriMas go up and down completely randomly.

Pair Corralation between Ardagh Metal and TriMas

Given the investment horizon of 90 days Ardagh Metal Packaging is expected to under-perform the TriMas. In addition to that, Ardagh Metal is 1.08 times more volatile than TriMas. It trades about -0.14 of its total potential returns per unit of risk. TriMas is currently generating about -0.01 per unit of volatility. If you would invest  2,552  in TriMas on September 27, 2024 and sell it today you would lose (72.00) from holding TriMas or give up 2.82% of portfolio value over 90 days.

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

Ardagh Metal Packaging  vs.  TriMas

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 conflicting performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

TriMas

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ardagh Metal and TriMas

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

The idea behind Ardagh Metal Packaging and TriMas 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.