Correlation Between Sealed Air and Nextracker

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

By analyzing existing cross correlation between Sealed Air and Nextracker Class A, you can compare the effects of market volatilities on Sealed Air and Nextracker 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 Nextracker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and Nextracker.

Diversification Opportunities for Sealed Air and Nextracker

0.07

Correlation Coefficient

Sealed Air  Nextracker

Significant diversification

The 3 months correlation between Sealed and Nextracker is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and Nextracker Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextracker Class A 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 Nextracker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextracker Class A has no effect on the direction of Sealed Air i.e., Sealed Air and Nextracker go up and down completely randomly.

Pair Corralation between Sealed Air and Nextracker

Considering the 90-day investment horizon Sealed Air is expected to generate 2.7 times less return on investment than Nextracker. But when comparing it to its historical volatility, Sealed Air is 2.83 times less risky than Nextracker. It trades about 0.05 of its potential returns per unit of risk. Nextracker Class A is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,723  in Nextracker Class A on August 31, 2024 and sell it today you would earn a total of  248.00  from holding Nextracker Class A or generate 6.66% return on investment over 90 days.

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

Sealed Air  vs.  Nextracker Class A

Sealed Air

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nextracker Class A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nextracker Class A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Nextracker may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sealed Air and Nextracker

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

The idea behind Sealed Air and Nextracker Class A 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.