Correlation Between Ardagh Metal and WestRock

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

By analyzing existing cross correlation between Ardagh Metal Packaging and WestRock Co, you can compare the effects of market volatilities on Ardagh Metal and WestRock 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 Ardagh Metal with a short position of WestRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ardagh Metal and WestRock.

Diversification Opportunities for Ardagh Metal and WestRock

0.03

Correlation Coefficient

Ardagh Metal  WestRock

Significant diversification

The 3 months correlation between Ardagh and WestRock is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ardagh Metal Packaging and WestRock Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WestRock and Ardagh Metal 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 Ardagh Metal Packaging are associated (or correlated) with WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WestRock has no effect on the direction of Ardagh Metal i.e., Ardagh Metal and WestRock go up and down completely randomly.

Pair Corralation between Ardagh Metal and WestRock

Given the investment horizon of 90 days Ardagh Metal Packaging is expected to generate 1.27 times more return on investment than WestRock. However, Ardagh Metal is 1.27 times more volatile than WestRock Co. It trades about 0.26 of its potential returns per unit of risk. WestRock Co is currently generating about 0.11 per unit of risk. If you would invest  348.00  in Ardagh Metal Packaging on February 6, 2024 and sell it today you would earn a total of  46.00  from holding Ardagh Metal Packaging or generate 13.22% return on investment over 90 days.

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

Ardagh Metal Packaging  vs.  WestRock Co

Ardagh Metal Packaging

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ardagh Metal Packaging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental drivers, Ardagh Metal reported solid returns over the last few months and may actually be approaching a breakup point.

WestRock

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WestRock Co are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, WestRock disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ardagh Metal and WestRock

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

The idea behind Ardagh Metal Packaging and WestRock Co 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..