Correlation Between Reynolds Consumer and Cascades

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

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

Diversification Opportunities for Reynolds Consumer and Cascades

-0.36

Correlation Coefficient

Reynolds Consumer  Cascades

Very good diversification

The 3 months correlation between Reynolds and Cascades is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Reynolds Consumer Products and Cascades in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cascades and Reynolds Consumer 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 Reynolds Consumer Products are associated (or correlated) with Cascades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cascades has no effect on the direction of Reynolds Consumer i.e., Reynolds Consumer and Cascades go up and down completely randomly.

Pair Corralation between Reynolds Consumer and Cascades

Given the investment horizon of 90 days Reynolds Consumer is expected to generate 440.67 times less return on investment than Cascades. But when comparing it to its historical volatility, Reynolds Consumer Products is 3.23 times less risky than Cascades. It trades about 0.0 of its potential returns per unit of risk. Cascades is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  617.00  in Cascades on September 29, 2024 and sell it today you would earn a total of  172.00  from holding Cascades or generate 27.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.62%
Values	Daily Returns

Reynolds Consumer Products  vs.  Cascades

Reynolds Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reynolds Consumer Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Reynolds Consumer and Cascades

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

The idea behind Reynolds Consumer Products and Cascades 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.