Correlation Between Avery Dennison and Good Natured

Can any of the company-specific risk be diversified away by investing in both Avery Dennison and Good Natured 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 Avery Dennison and Good Natured into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avery Dennison Corp and good natured Products, you can compare the effects of market volatilities on Avery Dennison and Good Natured 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 Avery Dennison with a short position of Good Natured. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avery Dennison and Good Natured.

Diversification Opportunities for Avery Dennison and Good Natured

0.06

Correlation Coefficient

Avery Dennison  Good Natured

Significant diversification

The 3 months correlation between Avery and Good is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and good natured Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on good natured Products and Avery Dennison 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 Avery Dennison Corp are associated (or correlated) with Good Natured. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of good natured Products has no effect on the direction of Avery Dennison i.e., Avery Dennison and Good Natured go up and down completely randomly.

Pair Corralation between Avery Dennison and Good Natured

Considering the 90-day investment horizon Avery Dennison Corp is expected to generate 0.11 times more return on investment than Good Natured. However, Avery Dennison Corp is 9.33 times less risky than Good Natured. It trades about 0.02 of its potential returns per unit of risk. good natured Products is currently generating about -0.01 per unit of risk. If you would invest  17,637  in Avery Dennison Corp on September 15, 2024 and sell it today you would earn a total of  1,877  from holding Avery Dennison Corp or generate 10.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.58%
Values	Daily Returns

Avery Dennison Corp  vs.  good natured Products

Avery Dennison Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avery Dennison Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

good natured Products

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days good natured Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly conflicting basic indicators, Good Natured reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avery Dennison and Good Natured

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

The idea behind Avery Dennison Corp and good natured Products 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.