Correlation Between CHINA SOUTHN and Avery Dennison
Can any of the company-specific risk be diversified away by investing in both CHINA SOUTHN and Avery Dennison 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 CHINA SOUTHN and Avery Dennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA SOUTHN AIR H and Avery Dennison Corp, you can compare the effects of market volatilities on CHINA SOUTHN and Avery Dennison 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 CHINA SOUTHN with a short position of Avery Dennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA SOUTHN and Avery Dennison.
Diversification Opportunities for CHINA SOUTHN and Avery Dennison
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CHINA and Avery is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and Avery Dennison Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison Corp and CHINA SOUTHN 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 CHINA SOUTHN AIR H are associated (or correlated) with Avery Dennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avery Dennison Corp has no effect on the direction of CHINA SOUTHN i.e., CHINA SOUTHN and Avery Dennison go up and down completely randomly.
Pair Corralation between CHINA SOUTHN and Avery Dennison
Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to under-perform the Avery Dennison. In addition to that, CHINA SOUTHN is 3.0 times more volatile than Avery Dennison Corp. It trades about -0.11 of its total potential returns per unit of risk. Avery Dennison Corp is currently generating about 0.14 per unit of volatility. If you would invest 18,000 in Avery Dennison Corp on October 24, 2024 and sell it today you would earn a total of 400.00 from holding Avery Dennison Corp or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA SOUTHN AIR H vs. Avery Dennison Corp
Performance |
| Timeline |
| CHINA SOUTHN AIR |
| Avery Dennison Corp |
CHINA SOUTHN and Avery Dennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA SOUTHN and Avery Dennison
The main advantage of trading using opposite CHINA SOUTHN and Avery Dennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN position performs unexpectedly, Avery Dennison 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 Avery Dennison will offset losses from the drop in Avery Dennison's long position.| CHINA SOUTHN vs. Apple Inc | CHINA SOUTHN vs. Apple Inc | CHINA SOUTHN vs. Apple Inc | CHINA SOUTHN vs. Apple Inc |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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