Correlation Between Avery Dennison and IPower

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Can any of the company-specific risk be diversified away by investing in both Avery Dennison and IPower 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 IPower 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 iPower Inc, you can compare the effects of market volatilities on Avery Dennison and IPower 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 IPower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avery Dennison and IPower.

Diversification Opportunities for Avery Dennison and IPower

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Avery and IPower is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and iPower Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPower Inc 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 IPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPower Inc has no effect on the direction of Avery Dennison i.e., Avery Dennison and IPower go up and down completely randomly.

Pair Corralation between Avery Dennison and IPower

Considering the 90-day investment horizon Avery Dennison Corp is expected to generate 0.09 times more return on investment than IPower. However, Avery Dennison Corp is 11.03 times less risky than IPower. It trades about 0.03 of its potential returns per unit of risk. iPower Inc is currently generating about -0.29 per unit of risk. If you would invest  20,703  in Avery Dennison Corp on August 27, 2024 and sell it today you would earn a total of  91.00  from holding Avery Dennison Corp or generate 0.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Avery Dennison Corp  vs.  iPower Inc

 Performance 
       Timeline  
Avery Dennison Corp 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Avery Dennison Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Avery Dennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
iPower Inc 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days iPower Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Avery Dennison and IPower Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avery Dennison and IPower

The main advantage of trading using opposite Avery Dennison and IPower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avery Dennison position performs unexpectedly, IPower 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 IPower will offset losses from the drop in IPower's long position.
The idea behind Avery Dennison Corp and iPower Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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