Correlation Between GreenPower and Avery Dennison

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

By analyzing existing cross correlation between GreenPower Motor and Avery Dennison Corp, you can compare the effects of market volatilities on GreenPower 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 GreenPower with a short position of Avery Dennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of GreenPower and Avery Dennison.

Diversification Opportunities for GreenPower and Avery Dennison

-0.52

Correlation Coefficient

GreenPower  Avery Dennison

Excellent diversification

The 3 months correlation between GreenPower and Avery is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding GreenPower Motor 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 GreenPower 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 GreenPower Motor 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 GreenPower i.e., GreenPower and Avery Dennison go up and down completely randomly.

Pair Corralation between GreenPower and Avery Dennison

Allowing for the 90-day total investment horizon GreenPower Motor is expected to under-perform the Avery Dennison. In addition to that, GreenPower is 4.71 times more volatile than Avery Dennison Corp. It trades about -0.22 of its total potential returns per unit of risk. Avery Dennison Corp is currently generating about 0.1 per unit of volatility. If you would invest  21,532  in Avery Dennison Corp on March 3, 2024 and sell it today you would earn a total of  1,227  from holding Avery Dennison Corp or generate 5.7% return on investment over 90 days.

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

GreenPower Motor  vs.  Avery Dennison Corp

GreenPower Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenPower Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Avery Dennison Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avery Dennison Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Avery Dennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GreenPower and Avery Dennison

The main advantage of trading using opposite GreenPower and Avery Dennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GreenPower 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.

The idea behind GreenPower Motor and Avery Dennison Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.