Correlation Between Greif Bros and Crown Holdings

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

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

Diversification Opportunities for Greif Bros and Crown Holdings

0.05

Correlation Coefficient

Greif Bros  Crown Holdings

Significant diversification

The 3 months correlation between Greif and Crown is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Greif Bros and Crown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Holdings and Greif Bros 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 Greif Bros are associated (or correlated) with Crown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Holdings has no effect on the direction of Greif Bros i.e., Greif Bros and Crown Holdings go up and down completely randomly.

Pair Corralation between Greif Bros and Crown Holdings

Considering the 90-day investment horizon Greif Bros is expected to under-perform the Crown Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Greif Bros is 1.35 times less risky than Crown Holdings. The stock trades about -0.43 of its potential returns per unit of risk. The Crown Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,815  in Crown Holdings on February 2, 2024 and sell it today you would earn a total of  491.00  from holding Crown Holdings or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Greif Bros  vs.  Crown Holdings

Greif Bros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greif Bros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Greif Bros is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Crown Holdings is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Greif Bros and Crown Holdings

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

The idea behind Greif Bros and Crown Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.