Correlation Between Sealed Air and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Sealed Air and Auto Trader 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 Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sealed Air Corp and Auto Trader Group, you can compare the effects of market volatilities on Sealed Air and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and Auto Trader.
Diversification Opportunities for Sealed Air and Auto Trader
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sealed and Auto is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air Corp and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Corp are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Sealed Air i.e., Sealed Air and Auto Trader go up and down completely randomly.
Pair Corralation between Sealed Air and Auto Trader
Assuming the 90 days trading horizon Sealed Air Corp is expected to under-perform the Auto Trader. In addition to that, Sealed Air is 2.69 times more volatile than Auto Trader Group. It trades about -0.31 of its total potential returns per unit of risk. Auto Trader Group is currently generating about -0.41 per unit of volatility. If you would invest 82,315 in Auto Trader Group on October 9, 2024 and sell it today you would lose (3,575) from holding Auto Trader Group or give up 4.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sealed Air Corp vs. Auto Trader Group
Performance |
| Timeline |
| Sealed Air Corp |
| Auto Trader Group |
Sealed Air and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sealed Air and Auto Trader
The main advantage of trading using opposite Sealed Air and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Sealed Air vs. Seche Environnement SA | Sealed Air vs. Oxford Technology 2 | Sealed Air vs. Impax Environmental Markets | Sealed Air vs. Dentsply Sirona |
| Auto Trader vs. Cembra Money Bank | Auto Trader vs. FinecoBank SpA | Auto Trader vs. Sparebank 1 SR | Auto Trader vs. Bankers Investment Trust |
Check out your portfolio center.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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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