Correlation Between Plexus Corp and Sealed Air

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

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

Diversification Opportunities for Plexus Corp and Sealed Air

0.62

Correlation Coefficient

Plexus Corp  Sealed Air

Poor diversification

The 3 months correlation between Plexus and Sealed is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Plexus Corp and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air and Plexus 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 Plexus Corp are associated (or correlated) with Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Plexus Corp i.e., Plexus Corp and Sealed Air go up and down completely randomly.

Pair Corralation between Plexus Corp and Sealed Air

Given the investment horizon of 90 days Plexus Corp is expected to generate 0.93 times more return on investment than Sealed Air. However, Plexus Corp is 1.07 times less risky than Sealed Air. It trades about 0.1 of its potential returns per unit of risk. Sealed Air is currently generating about 0.03 per unit of risk. If you would invest  9,739  in Plexus Corp on September 12, 2024 and sell it today you would earn a total of  6,918  from holding Plexus Corp or generate 71.03% return on investment over 90 days.

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

Plexus Corp  vs.  Sealed Air

Plexus Corp

Risk-Adjusted Performance

18 of 100

Solid

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

Sealed Air

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Sealed Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Plexus Corp and Sealed Air

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

The idea behind Plexus Corp and Sealed Air 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.