Correlation Between Richards Packaging and Pollard Banknote

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

By analyzing existing cross correlation between Richards Packaging Income and Pollard Banknote Limited, you can compare the effects of market volatilities on Richards Packaging and Pollard Banknote 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 Richards Packaging with a short position of Pollard Banknote. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richards Packaging and Pollard Banknote.

Diversification Opportunities for Richards Packaging and Pollard Banknote

0.86

Correlation Coefficient

Richards Packaging  Pollard Banknote

Very poor diversification

The 3 months correlation between Richards and Pollard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Richards Packaging Income and Pollard Banknote Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pollard Banknote and Richards Packaging 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 Richards Packaging Income are associated (or correlated) with Pollard Banknote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pollard Banknote has no effect on the direction of Richards Packaging i.e., Richards Packaging and Pollard Banknote go up and down completely randomly.

Pair Corralation between Richards Packaging and Pollard Banknote

Assuming the 90 days trading horizon Richards Packaging is expected to generate 1.02 times less return on investment than Pollard Banknote. But when comparing it to its historical volatility, Richards Packaging Income is 1.8 times less risky than Pollard Banknote. It trades about 0.27 of its potential returns per unit of risk. Pollard Banknote Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,797  in Pollard Banknote Limited on April 21, 2025 and sell it today you would earn a total of  378.00  from holding Pollard Banknote Limited or generate 21.04% return on investment over 90 days.

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

Richards Packaging Income  vs.  Pollard Banknote Limited

Richards Packaging Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Richards Packaging Income are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Richards Packaging sustained solid returns over the last few months and may actually be approaching a breakup point.

Pollard Banknote

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pollard Banknote Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, Pollard Banknote displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richards Packaging and Pollard Banknote

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

The idea behind Richards Packaging Income and Pollard Banknote Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.