Correlation Between Avery Dennison and Canon

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

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

Diversification Opportunities for Avery Dennison and Canon

-0.54

Correlation Coefficient

Avery Dennison  Canon

Excellent diversification

The 3 months correlation between Avery and Canon is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and Canon Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Inc ADR and Avery Dennison 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 Avery Dennison Corp are associated (or correlated) with Canon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Inc ADR has no effect on the direction of Avery Dennison i.e., Avery Dennison and Canon go up and down completely randomly.

Pair Corralation between Avery Dennison and Canon

If you would invest  19,772  in Avery Dennison Corp on January 24, 2024 and sell it today you would earn a total of  1,405  from holding Avery Dennison Corp or generate 7.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.61%
Values	Daily Returns

Avery Dennison Corp  vs.  Canon Inc ADR

Avery Dennison Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avery Dennison Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Avery Dennison may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Canon Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canon Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Canon is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Avery Dennison and Canon

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

The idea behind Avery Dennison Corp and Canon Inc ADR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.