Correlation Between Packaging Corp and Ardagh Metal

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

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

Diversification Opportunities for Packaging Corp and Ardagh Metal

-0.16

Correlation Coefficient

Packaging Corp  Ardagh Metal

Good diversification

The 3 months correlation between Packaging and Ardagh is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of 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 Packaging Corp 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 Packaging Corp of 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 Packaging Corp i.e., Packaging Corp and Ardagh Metal go up and down completely randomly.

Pair Corralation between Packaging Corp and Ardagh Metal

Considering the 90-day investment horizon Packaging Corp of is expected to generate 0.53 times more return on investment than Ardagh Metal. However, Packaging Corp of is 1.88 times less risky than Ardagh Metal. It trades about 0.14 of its potential returns per unit of risk. Ardagh Metal Packaging is currently generating about 0.02 per unit of risk. If you would invest  12,231  in Packaging Corp of on September 14, 2024 and sell it today you would earn a total of  11,678  from holding Packaging Corp of or generate 95.48% return on investment over 90 days.

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

Packaging Corp of  vs.  Ardagh Metal Packaging

Packaging Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Packaging Corp of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Packaging Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Packaging Corp and Ardagh Metal

The main advantage of trading using opposite Packaging Corp and Ardagh Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packaging Corp 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 Packaging Corp of 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.