Correlation Between Crown Holdings and Ardagh Metal

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

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

Diversification Opportunities for Crown Holdings and Ardagh Metal

0.72

Correlation Coefficient

Crown Holdings  Ardagh Metal

Poor diversification

The 3 months correlation between Crown and Ardagh is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Crown Holdings and Ardagh Metal Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardagh Metal Packaging and Crown Holdings 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 Crown Holdings are associated (or correlated) with Ardagh Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardagh Metal Packaging has no effect on the direction of Crown Holdings i.e., Crown Holdings and Ardagh Metal go up and down completely randomly.

Pair Corralation between Crown Holdings and Ardagh Metal

Considering the 90-day investment horizon Crown Holdings is expected to generate 0.55 times more return on investment than Ardagh Metal. However, Crown Holdings is 1.82 times less risky than Ardagh Metal. It trades about -0.06 of its potential returns per unit of risk. Ardagh Metal Packaging is currently generating about -0.06 per unit of risk. If you would invest  9,222  in Crown Holdings on September 14, 2024 and sell it today you would lose (414.00) from holding Crown Holdings or give up 4.49% of portfolio value over 90 days.

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

Crown Holdings  vs.  Ardagh Metal Packaging

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Crown Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Crown Holdings and Ardagh Metal

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

The idea behind Crown Holdings and Ardagh Metal 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..