Correlation Between WestRock and Karat Packaging
Can any of the company-specific risk be diversified away by investing in both WestRock and Karat Packaging 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 WestRock and Karat Packaging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WestRock Co and Karat Packaging, you can compare the effects of market volatilities on WestRock and Karat Packaging 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 WestRock with a short position of Karat Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of WestRock and Karat Packaging.
Diversification Opportunities for WestRock and Karat Packaging
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WestRock and Karat is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding WestRock Co and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging and WestRock 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 WestRock Co are associated (or correlated) with Karat Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karat Packaging has no effect on the direction of WestRock i.e., WestRock and Karat Packaging go up and down completely randomly.
Pair Corralation between WestRock and Karat Packaging
Considering the 90-day investment horizon WestRock is expected to generate 1.13 times less return on investment than Karat Packaging. But when comparing it to its historical volatility, WestRock Co is 1.56 times less risky than Karat Packaging. It trades about 0.13 of its potential returns per unit of risk. Karat Packaging is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,267 in Karat Packaging on August 29, 2024 and sell it today you would earn a total of 1,824 from holding Karat Packaging or generate 143.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 74.55% |
| Values | Daily Returns |
WestRock Co vs. Karat Packaging
Performance |
| Timeline |
| WestRock |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Karat Packaging |
WestRock and Karat Packaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WestRock and Karat Packaging
The main advantage of trading using opposite WestRock and Karat Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WestRock position performs unexpectedly, Karat Packaging 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 Karat Packaging will offset losses from the drop in Karat Packaging's long position.| WestRock vs. Packaging Corp of | WestRock vs. Sealed Air | WestRock vs. Fortive Corp | WestRock vs. LKQ Corporation |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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