Correlation Between Greencoat Renewables and Smurfit Kappa

Can any of the company-specific risk be diversified away by investing in both Greencoat Renewables and Smurfit Kappa 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 Greencoat Renewables and Smurfit Kappa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Greencoat Renewables PLC and Smurfit Kappa Group, you can compare the effects of market volatilities on Greencoat Renewables and Smurfit Kappa 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 Greencoat Renewables with a short position of Smurfit Kappa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greencoat Renewables and Smurfit Kappa.

Diversification Opportunities for Greencoat Renewables and Smurfit Kappa

0.28

Correlation Coefficient

Greencoat Renewables  Smurfit Kappa

Modest diversification

The 3 months correlation between Greencoat and Smurfit is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Greencoat Renewables PLC and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group and Greencoat Renewables 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 Greencoat Renewables PLC are associated (or correlated) with Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of Greencoat Renewables i.e., Greencoat Renewables and Smurfit Kappa go up and down completely randomly.

Pair Corralation between Greencoat Renewables and Smurfit Kappa

Assuming the 90 days trading horizon Greencoat Renewables is expected to generate 8.54 times less return on investment than Smurfit Kappa. In addition to that, Greencoat Renewables is 1.03 times more volatile than Smurfit Kappa Group. It trades about 0.02 of its total potential returns per unit of risk. Smurfit Kappa Group is currently generating about 0.18 per unit of volatility. If you would invest  3,899  in Smurfit Kappa Group on March 5, 2024 and sell it today you would earn a total of  571.00  from holding Smurfit Kappa Group or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Greencoat Renewables PLC  vs.  Smurfit Kappa Group

Greencoat Renewables PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Greencoat Renewables PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Greencoat Renewables is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Smurfit Kappa Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Greencoat Renewables and Smurfit Kappa

The main advantage of trading using opposite Greencoat Renewables and Smurfit Kappa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greencoat Renewables position performs unexpectedly, Smurfit Kappa 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 Smurfit Kappa will offset losses from the drop in Smurfit Kappa's long position.

The idea behind Greencoat Renewables PLC and Smurfit Kappa Group 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.