Correlation Between Crown Holdings and Graphic Packaging

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

By analyzing existing cross correlation between Crown Holdings and Graphic Packaging Holding, you can compare the effects of market volatilities on Crown Holdings and Graphic Packaging 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 Crown Holdings with a short position of Graphic Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Holdings and Graphic Packaging.

Diversification Opportunities for Crown Holdings and Graphic Packaging

-0.2

Correlation Coefficient

Crown Holdings  Graphic Packaging

Good diversification

The 3 months correlation between Crown and Graphic is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Crown Holdings and Graphic Packaging Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphic Packaging Holding and Crown Holdings 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 Crown Holdings are associated (or correlated) with Graphic Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphic Packaging Holding has no effect on the direction of Crown Holdings i.e., Crown Holdings and Graphic Packaging go up and down completely randomly.

Pair Corralation between Crown Holdings and Graphic Packaging

Considering the 90-day investment horizon Crown Holdings is expected to generate 5.96 times less return on investment than Graphic Packaging. In addition to that, Crown Holdings is 1.18 times more volatile than Graphic Packaging Holding. It trades about 0.01 of its total potential returns per unit of risk. Graphic Packaging Holding is currently generating about 0.04 per unit of volatility. If you would invest  2,423  in Graphic Packaging Holding on January 18, 2024 and sell it today you would earn a total of  319.00  from holding Graphic Packaging Holding or generate 13.17% return on investment over 90 days.

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

Crown Holdings  vs.  Graphic Packaging Holding

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Graphic Packaging Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graphic Packaging Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Graphic Packaging may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Crown Holdings and Graphic Packaging

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

The idea behind Crown Holdings and Graphic Packaging Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.