Correlation Between Graphic Packaging and PulteGroup

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

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

Diversification Opportunities for Graphic Packaging and PulteGroup

0.88

Correlation Coefficient

Graphic Packaging  PulteGroup

Very poor diversification

The 3 months correlation between Graphic and PulteGroup is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Graphic Packaging Holding and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup and Graphic Packaging 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 Graphic Packaging Holding are associated (or correlated) with PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of Graphic Packaging i.e., Graphic Packaging and PulteGroup go up and down completely randomly.

Pair Corralation between Graphic Packaging and PulteGroup

Considering the 90-day investment horizon Graphic Packaging is expected to generate 1.55 times less return on investment than PulteGroup. But when comparing it to its historical volatility, Graphic Packaging Holding is 1.2 times less risky than PulteGroup. It trades about 0.16 of its potential returns per unit of risk. PulteGroup is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,987  in PulteGroup on January 17, 2024 and sell it today you would earn a total of  3,892  from holding PulteGroup or generate 55.7% return on investment over 90 days.

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

Graphic Packaging Holding  vs.  PulteGroup

Graphic Packaging Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graphic Packaging Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Graphic Packaging may actually be approaching a critical reversion point that can send shares even higher in May 2024.

PulteGroup

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PulteGroup are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, PulteGroup is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Graphic Packaging and PulteGroup

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

The idea behind Graphic Packaging Holding and PulteGroup 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.