Correlation Between Premium Brands and CCL Industries
Can any of the company-specific risk be diversified away by investing in both Premium Brands and CCL 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 Premium Brands and CCL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premium Brands Holdings and CCL Industries, you can compare the effects of market volatilities on Premium Brands and CCL 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 Premium Brands with a short position of CCL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Brands and CCL Industries.
Diversification Opportunities for Premium Brands and CCL Industries
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Premium and CCL is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and CCL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCL Industries and Premium Brands 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 Premium Brands Holdings are associated (or correlated) with CCL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCL Industries has no effect on the direction of Premium Brands i.e., Premium Brands and CCL Industries go up and down completely randomly.
Pair Corralation between Premium Brands and CCL Industries
Assuming the 90 days trading horizon Premium Brands Holdings is expected to under-perform the CCL Industries. In addition to that, Premium Brands is 1.41 times more volatile than CCL Industries. It trades about -0.17 of its total potential returns per unit of risk. CCL Industries is currently generating about -0.18 per unit of volatility. If you would invest 8,171 in CCL Industries on October 22, 2024 and sell it today you would lose (1,027) from holding CCL Industries or give up 12.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premium Brands Holdings vs. CCL Industries
Performance |
| Timeline |
| Premium Brands Holdings |
| CCL Industries |
Premium Brands and CCL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premium Brands and CCL Industries
The main advantage of trading using opposite Premium Brands and CCL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premium Brands position performs unexpectedly, CCL 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 CCL Industries will offset losses from the drop in CCL Industries' long position.| Premium Brands vs. CCL Industries | Premium Brands vs. North West | Premium Brands vs. Maple Leaf Foods | Premium Brands vs. FirstService Corp |
| CCL Industries vs. Stella Jones | CCL Industries vs. Gildan Activewear | CCL Industries vs. Toromont Industries | CCL Industries vs. Waste Connections |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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