Correlation Between Avery Dennison and International Paper
Can any of the company-specific risk be diversified away by investing in both Avery Dennison and International Paper 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 Avery Dennison and International Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avery Dennison Corp and International Paper, you can compare the effects of market volatilities on Avery Dennison and International Paper 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 Avery Dennison with a short position of International Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avery Dennison and International Paper.
Diversification Opportunities for Avery Dennison and International Paper
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Avery and International is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Avery Dennison 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 Avery Dennison Corp are associated (or correlated) with International Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Paper has no effect on the direction of Avery Dennison i.e., Avery Dennison and International Paper go up and down completely randomly.
Pair Corralation between Avery Dennison and International Paper
Considering the 90-day investment horizon Avery Dennison Corp is expected to under-perform the International Paper. In addition to that, Avery Dennison is 1.17 times more volatile than International Paper. It trades about -0.07 of its total potential returns per unit of risk. International Paper is currently generating about 0.21 per unit of volatility. If you would invest 5,382 in International Paper on November 1, 2024 and sell it today you would earn a total of 323.00 from holding International Paper or generate 6.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avery Dennison Corp vs. International Paper
Performance |
| Timeline |
| Avery Dennison Corp |
| International Paper |
Avery Dennison and International Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avery Dennison and International Paper
The main advantage of trading using opposite Avery Dennison and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avery Dennison position performs unexpectedly, International Paper 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 International Paper will offset losses from the drop in International Paper's long position.| Avery Dennison vs. Packaging Corp of | Avery Dennison vs. O I Glass | Avery Dennison vs. Silgan Holdings | Avery Dennison vs. Sealed Air |
| International Paper vs. Sealed Air | International Paper vs. Avery Dennison Corp | International Paper vs. Sonoco Products | International Paper vs. Ball Corporation |
Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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