Correlation Between HNI Corp and Avery Dennison

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

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

Diversification Opportunities for HNI Corp and Avery Dennison

0.85

Correlation Coefficient

HNI Corp  Avery Dennison

Very poor diversification

The 3 months correlation between HNI and Avery is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp 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 HNI Corp 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 HNI Corp 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 HNI Corp i.e., HNI Corp and Avery Dennison go up and down completely randomly.

Pair Corralation between HNI Corp and Avery Dennison

Considering the 90-day investment horizon HNI Corp is expected to under-perform the Avery Dennison. In addition to that, HNI Corp is 1.32 times more volatile than Avery Dennison Corp. It trades about -0.14 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  21,731  in Avery Dennison Corp on January 25, 2024 and sell it today you would lose (489.00) from holding Avery Dennison Corp or give up 2.25% of portfolio value over 90 days.

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

HNI Corp  vs.  Avery Dennison Corp

HNI Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HNI Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, HNI Corp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 weak basic indicators, Avery Dennison may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with HNI Corp and Avery Dennison

The main advantage of trading using opposite HNI Corp and Avery Dennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNI Corp 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 HNI Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.