Correlation Between Waters and Sealed Air
Can any of the company-specific risk be diversified away by investing in both Waters and Sealed Air 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 Waters and Sealed Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waters and Sealed Air, you can compare the effects of market volatilities on Waters and Sealed Air 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 Waters with a short position of Sealed Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and Sealed Air.
Diversification Opportunities for Waters and Sealed Air
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Waters and Sealed is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air and Waters 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 Waters are associated (or correlated) with Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Waters i.e., Waters and Sealed Air go up and down completely randomly.
Pair Corralation between Waters and Sealed Air
Considering the 90-day investment horizon Waters is expected to generate 1.0 times more return on investment than Sealed Air. However, Waters is 1.0 times less risky than Sealed Air. It trades about 0.02 of its potential returns per unit of risk. Sealed Air is currently generating about -0.02 per unit of risk. If you would invest 34,462 in Waters on September 3, 2024 and sell it today you would earn a total of 4,010 from holding Waters or generate 11.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waters vs. Sealed Air
Performance |
| Timeline |
| Waters |
| Sealed Air |
Waters and Sealed Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waters and Sealed Air
The main advantage of trading using opposite Waters and Sealed Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, Sealed Air 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 Sealed Air will offset losses from the drop in Sealed Air's long position.The idea behind Waters and Sealed Air 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.| Sealed Air vs. Avery Dennison Corp | Sealed Air vs. International Paper | Sealed Air vs. Sonoco Products | Sealed Air vs. Packaging Corp of |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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