Correlation Between Cascades and Pactiv Evergreen

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

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

Diversification Opportunities for Cascades and Pactiv Evergreen

0.76

Correlation Coefficient

Cascades  Pactiv Evergreen

Poor diversification

The 3 months correlation between Cascades and Pactiv is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cascades and Pactiv Evergreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pactiv Evergreen and Cascades 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 Cascades are associated (or correlated) with Pactiv Evergreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pactiv Evergreen has no effect on the direction of Cascades i.e., Cascades and Pactiv Evergreen go up and down completely randomly.

Pair Corralation between Cascades and Pactiv Evergreen

Assuming the 90 days horizon Cascades is expected to generate 12.17 times less return on investment than Pactiv Evergreen. But when comparing it to its historical volatility, Cascades is 1.61 times less risky than Pactiv Evergreen. It trades about 0.03 of its potential returns per unit of risk. Pactiv Evergreen is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,143  in Pactiv Evergreen on September 28, 2024 and sell it today you would earn a total of  597.00  from holding Pactiv Evergreen or generate 52.23% return on investment over 90 days.

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

Cascades  vs.  Pactiv Evergreen

Cascades

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cascades are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cascades is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pactiv Evergreen

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Cascades and Pactiv Evergreen

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

The idea behind Cascades and Pactiv Evergreen 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .