Correlation Between SEALED AIR and MYFAIR GOLD

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

By analyzing existing cross correlation between SEALED AIR and MYFAIR GOLD P, you can compare the effects of market volatilities on SEALED AIR and MYFAIR GOLD 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 SEALED AIR with a short position of MYFAIR GOLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEALED AIR and MYFAIR GOLD.

Diversification Opportunities for SEALED AIR and MYFAIR GOLD

0.56

Correlation Coefficient

SEALED AIR  MYFAIR GOLD

Very weak diversification

The 3 months correlation between SEALED and MYFAIR is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR and MYFAIR GOLD P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYFAIR GOLD P and SEALED AIR 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 SEALED AIR are associated (or correlated) with MYFAIR GOLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYFAIR GOLD P has no effect on the direction of SEALED AIR i.e., SEALED AIR and MYFAIR GOLD go up and down completely randomly.

Pair Corralation between SEALED AIR and MYFAIR GOLD

Assuming the 90 days trading horizon SEALED AIR is expected to generate 1.11 times less return on investment than MYFAIR GOLD. But when comparing it to its historical volatility, SEALED AIR is 2.41 times less risky than MYFAIR GOLD. It trades about 0.13 of its potential returns per unit of risk. MYFAIR GOLD P is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  110.00  in MYFAIR GOLD P on September 5, 2024 and sell it today you would earn a total of  12.00  from holding MYFAIR GOLD P or generate 10.91% return on investment over 90 days.

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

SEALED AIR   vs.  MYFAIR GOLD P

SEALED AIR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEALED AIR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SEALED AIR unveiled solid returns over the last few months and may actually be approaching a breakup point.

MYFAIR GOLD P

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MYFAIR GOLD P are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MYFAIR GOLD reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SEALED AIR and MYFAIR GOLD

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

The idea behind SEALED AIR and MYFAIR GOLD P 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.