Showing posts with label Hefty Waste Bags. Show all posts
Showing posts with label Hefty Waste Bags. Show all posts

Sunday, December 4, 2022

Mothly Return Volatility (Beta) of Reynolds Consumer Products

Reynolds Consumer Products (REYN) makes many iconic household products, such as Reynolds Wrap, Hefty waste bags, and FreshLock zipper bags [Exhibit 1]

Exhibit 1: Some of the Products Made by Reynolds Consumer Products Co.

Reynolds Consumer Products Source: Reynolds brands 

 I analyzed the monthly return of Reynolds (REYN) between February 2020 and November 2022. Here's the histogram of the monthly returns (click on the image to see an enlarged version) [Exhibit 2]:

Exhibit 2

Source: Data Provided by IEX Cloud, Author Calculations and Graphs Using Microsoft Excel 

Here's the graph of the monthly returns of the Vanguard S&P 500 Index ETF (VOO) on the x-axis and Reynold's monthly returns on the y-axis [Exhibit 3]:

Exhibit 3

Source: Data Provided by IEX Cloud, Graph Created using RStudio

The Pearson correlation of the monthly returns is a positive 0.46. This correlation value can be considered to have medium strength. This correlation is statistically significant at the 95% confidence interval with a p-value of 0.0057.  

A linear regression of the monthly returns of Reynolds and the Vanguard S&P 500 Index ETF yields a beta value of 0.44. This beta value means that for every 1% change in the value of the Vanguard ETF, on average, Reynolds' stock will change by 0.44%. Yahoo Finance also shows a beta of 0.44 [Exhibit 4]

Exhibit 4

Source: Yahoo Finance

The adjusted R-squared value provided by the linear regression is 0.19. This adjusted R-squared value indicates that about 19% of Reynold's monthly returns are explained by the monthly returns of the Vanguard S&P 500 Index ETF.  

Here's the output from the linear regression model constructed using RStudio:

Call:

lm(formula = REYN_Monthly_Return ~ VOO_Monthly_Return, data = VOOandREYN_MonthlyReturns)

Residuals:

      Min        1Q    Median        3Q       Max 

-0.092919 -0.037524 -0.003499  0.037494  0.137349 

Coefficients:

                   Estimate Std. Error t value Pr(>|t|)   

(Intercept)        0.001072   0.009234   0.116  0.90828   

VOO_Monthly_Return 0.440311   0.148653   2.962  0.00572 **

---

Signif. codes:  0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1

Residual standard error: 0.05329 on 32 degrees of freedom

Multiple R-squared:  0.2152, Adjusted R-squared:  0.1907 

F-statistic: 8.773 on 1 and 32 DF,  p-value: 0.005722

The p-value is significant at a 95% confidence interval with a value of 0.005722. 

Here's the residuals plot for the linear regression between Reynolds Consumer Products and the Vanguard S&P 500 Index ETF [Exhibit 5]:

Exhibit 5

Residuals Plot for Linear Regression of the monthly returns of the Vanguard S&P 500 Index as the independent variable and Reynold Consumer Products (Source: Data Provided by IEX Cloud, Graph Created using RStudio)

  Here are the average, first quartile, third quartile, and standard deviation of Reynold's monthly returns [Exhibit 6]:

Exhibit 6



Here are the average, first quartile, third quartile, and standard deviation of the Vanguard S&P 500 Index ETF [Exhibit 7]:

Exhibit 7




  


The Costco Paradox

What can we learn from the success of Costco? Summary: ...