Correlation Between Sonoco Products and Silgan Holdings

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

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

Diversification Opportunities for Sonoco Products and Silgan Holdings

0.3

Correlation Coefficient

Sonoco Products  Silgan Holdings

Weak diversification

The 3 months correlation between Sonoco and Silgan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sonoco Products and Silgan Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silgan Holdings and Sonoco Products 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 Sonoco Products are associated (or correlated) with Silgan Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silgan Holdings has no effect on the direction of Sonoco Products i.e., Sonoco Products and Silgan Holdings go up and down completely randomly.

Pair Corralation between Sonoco Products and Silgan Holdings

Considering the 90-day investment horizon Sonoco Products is expected to under-perform the Silgan Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Sonoco Products is 1.28 times less risky than Silgan Holdings. The stock trades about -0.03 of its potential returns per unit of risk. The Silgan Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,548  in Silgan Holdings on January 24, 2024 and sell it today you would earn a total of  156.00  from holding Silgan Holdings or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Sonoco Products  vs.  Silgan Holdings

Sonoco Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonoco Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sonoco Products is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Silgan Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silgan Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Silgan Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Sonoco Products and Silgan Holdings

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

The idea behind Sonoco Products and Silgan 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.