Correlation Between CCL Industries and Ritchie Bros

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

By analyzing existing cross correlation between CCL Industries and Ritchie Bros Auctioneers, you can compare the effects of market volatilities on CCL Industries and Ritchie Bros 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 CCL Industries with a short position of Ritchie Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of CCL Industries and Ritchie Bros.

Diversification Opportunities for CCL Industries and Ritchie Bros

0.69

Correlation Coefficient

CCL Industries  Ritchie Bros

Poor diversification

The 3 months correlation between CCL and Ritchie is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CCL Industries and Ritchie Bros Auctioneers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ritchie Bros Auctioneers and CCL Industries 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 CCL Industries are associated (or correlated) with Ritchie Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ritchie Bros Auctioneers has no effect on the direction of CCL Industries i.e., CCL Industries and Ritchie Bros go up and down completely randomly.

Pair Corralation between CCL Industries and Ritchie Bros

Assuming the 90 days trading horizon CCL Industries is expected to generate 1.2 times more return on investment than Ritchie Bros. However, CCL Industries is 1.2 times more volatile than Ritchie Bros Auctioneers. It trades about 0.15 of its potential returns per unit of risk. Ritchie Bros Auctioneers is currently generating about 0.1 per unit of risk. If you would invest  5,840  in CCL Industries on February 18, 2024 and sell it today you would earn a total of  1,329  from holding CCL Industries or generate 22.76% return on investment over 90 days.

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

CCL Industries  vs.  Ritchie Bros Auctioneers

CCL Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CCL Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental drivers, CCL Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ritchie Bros Auctioneers

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ritchie Bros may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with CCL Industries and Ritchie Bros

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

The idea behind CCL Industries and Ritchie Bros Auctioneers 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.