Correlation Between Smurfit Kappa and PREMIUM BRANDS

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

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

Diversification Opportunities for Smurfit Kappa and PREMIUM BRANDS

0.27

Correlation Coefficient

Smurfit Kappa  PREMIUM BRANDS

Modest diversification

The 3 months correlation between Smurfit and PREMIUM is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and PREMIUM BRANDS HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIUM BRANDS HLDGS and Smurfit Kappa 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 Smurfit Kappa Group are associated (or correlated) with PREMIUM BRANDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIUM BRANDS HLDGS has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and PREMIUM BRANDS go up and down completely randomly.

Pair Corralation between Smurfit Kappa and PREMIUM BRANDS

Assuming the 90 days trading horizon Smurfit Kappa Group is expected to generate 0.54 times more return on investment than PREMIUM BRANDS. However, Smurfit Kappa Group is 1.85 times less risky than PREMIUM BRANDS. It trades about 0.21 of its potential returns per unit of risk. PREMIUM BRANDS HLDGS is currently generating about 0.03 per unit of risk. If you would invest  3,858  in Smurfit Kappa Group on March 13, 2024 and sell it today you would earn a total of  560.00  from holding Smurfit Kappa Group or generate 14.52% return on investment over 90 days.

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

Smurfit Kappa Group  vs.  PREMIUM BRANDS HLDGS

Smurfit Kappa Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Smurfit Kappa unveiled solid returns over the last few months and may actually be approaching a breakup point.

PREMIUM BRANDS HLDGS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIUM BRANDS HLDGS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PREMIUM BRANDS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Smurfit Kappa and PREMIUM BRANDS

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

The idea behind Smurfit Kappa Group and PREMIUM BRANDS HLDGS 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.