Correlation Between RPM International and Silgan Holdings
Can any of the company-specific risk be diversified away by investing in both RPM International and Silgan Holdings 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 RPM International and Silgan Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RPM International and Silgan Holdings, you can compare the effects of market volatilities on RPM International and Silgan Holdings 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 RPM International with a short position of Silgan Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPM International and Silgan Holdings.
Diversification Opportunities for RPM International and Silgan Holdings
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RPM and Silgan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding RPM International and Silgan Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silgan Holdings and RPM International 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 RPM International are associated (or correlated) with Silgan Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silgan Holdings has no effect on the direction of RPM International i.e., RPM International and Silgan Holdings go up and down completely randomly.
Pair Corralation between RPM International and Silgan Holdings
Considering the 90-day investment horizon RPM International is expected to generate 0.95 times more return on investment than Silgan Holdings. However, RPM International is 1.06 times less risky than Silgan Holdings. It trades about 0.07 of its potential returns per unit of risk. Silgan Holdings is currently generating about 0.02 per unit of risk. If you would invest 7,932 in RPM International on November 27, 2024 and sell it today you would earn a total of 4,115 from holding RPM International or generate 51.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
RPM International vs. Silgan Holdings
Performance |
Timeline |
RPM International |
Silgan Holdings |
RPM International and Silgan Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with RPM International and Silgan Holdings
The main advantage of trading using opposite RPM International and Silgan Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPM International position performs unexpectedly, Silgan Holdings 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 Silgan Holdings will offset losses from the drop in Silgan Holdings' long position.RPM International vs. Innospec | ||
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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