Correlation Between Avery Dennison and Myers Industries

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

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

Diversification Opportunities for Avery Dennison and Myers Industries

0.79

Correlation Coefficient

Avery Dennison  Myers Industries

Poor diversification

The 3 months correlation between Avery and Myers is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and Myers Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Myers Industries and Avery Dennison 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 Avery Dennison Corp are associated (or correlated) with Myers Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Myers Industries has no effect on the direction of Avery Dennison i.e., Avery Dennison and Myers Industries go up and down completely randomly.

Pair Corralation between Avery Dennison and Myers Industries

Considering the 90-day investment horizon Avery Dennison Corp is expected to generate 0.8 times more return on investment than Myers Industries. However, Avery Dennison Corp is 1.25 times less risky than Myers Industries. It trades about 0.04 of its potential returns per unit of risk. Myers Industries is currently generating about 0.01 per unit of risk. If you would invest  16,605  in Avery Dennison Corp on January 30, 2024 and sell it today you would earn a total of  5,298  from holding Avery Dennison Corp or generate 31.91% return on investment over 90 days.

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

Avery Dennison Corp  vs.  Myers Industries

Avery Dennison Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avery Dennison Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Avery Dennison may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Myers Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Myers Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Myers Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avery Dennison and Myers Industries

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

The idea behind Avery Dennison Corp and Myers Industries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.