Correlation Between CCL Industries and Open Text

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

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

Diversification Opportunities for CCL Industries and Open Text

0.5

Correlation Coefficient

CCL Industries  Open Text

Very weak diversification

The 3 months correlation between CCL and Open is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries and Open Text Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Text Corp and CCL Industries 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 CCL Industries are associated (or correlated) with Open Text. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Text Corp has no effect on the direction of CCL Industries i.e., CCL Industries and Open Text go up and down completely randomly.

Pair Corralation between CCL Industries and Open Text

Assuming the 90 days trading horizon CCL Industries is expected to under-perform the Open Text. But the stock apears to be less risky and, when comparing its historical volatility, CCL Industries is 1.74 times less risky than Open Text. The stock trades about -0.1 of its potential returns per unit of risk. The Open Text Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,370  in Open Text Corp on September 13, 2024 and sell it today you would lose (70.00) from holding Open Text Corp or give up 1.6% of portfolio value over 90 days.

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

CCL Industries  vs.  Open Text Corp

CCL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Open Text Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Open Text Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Open Text is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CCL Industries and Open Text

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

The idea behind CCL Industries and Open Text Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.