Correlation Between SEALED AIR and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both SEALED AIR and Preferred Bank 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 Preferred Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEALED AIR and Preferred Bank, you can compare the effects of market volatilities on SEALED AIR and Preferred Bank 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 Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEALED AIR and Preferred Bank.
Diversification Opportunities for SEALED AIR and Preferred Bank
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SEALED and Preferred is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank 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 are associated (or correlated) with Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of SEALED AIR i.e., SEALED AIR and Preferred Bank go up and down completely randomly.
Pair Corralation between SEALED AIR and Preferred Bank
Assuming the 90 days trading horizon SEALED AIR is expected to generate 0.69 times more return on investment than Preferred Bank. However, SEALED AIR is 1.46 times less risky than Preferred Bank. It trades about 0.14 of its potential returns per unit of risk. Preferred Bank is currently generating about -0.03 per unit of risk. If you would invest 3,260 in SEALED AIR on October 28, 2024 and sell it today you would earn a total of 80.00 from holding SEALED AIR or generate 2.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SEALED AIR vs. Preferred Bank
Performance |
| Timeline |
| SEALED AIR |
| Preferred Bank |
SEALED AIR and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SEALED AIR and Preferred Bank
The main advantage of trading using opposite SEALED AIR and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEALED AIR position performs unexpectedly, Preferred Bank 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.The idea behind SEALED AIR and Preferred Bank 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.| Preferred Bank vs. CARDINAL HEALTH | Preferred Bank vs. Kingdee International Software | Preferred Bank vs. US Physical Therapy | Preferred Bank vs. Acadia Healthcare |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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