Correlation Between Graphic Packaging and International Paper
Can any of the company-specific risk be diversified away by investing in both Graphic Packaging 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 Graphic Packaging and International Paper 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 International Paper, you can compare the effects of market volatilities on Graphic Packaging 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 Graphic Packaging with a short position of International Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graphic Packaging and International Paper.
Diversification Opportunities for Graphic Packaging and International Paper
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Graphic and International is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Graphic Packaging Holding and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper 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 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 Graphic Packaging i.e., Graphic Packaging and International Paper go up and down completely randomly.
Pair Corralation between Graphic Packaging and International Paper
Considering the 90-day investment horizon Graphic Packaging Holding is expected to under-perform the International Paper. But the stock apears to be less risky and, when comparing its historical volatility, Graphic Packaging Holding is 1.83 times less risky than International Paper. The stock trades about -0.06 of its potential returns per unit of risk. The International Paper is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 4,825 in International Paper on August 27, 2024 and sell it today you would earn a total of 1,132 from holding International Paper or generate 23.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Graphic Packaging Holding vs. International Paper
Performance |
| Timeline |
| Graphic Packaging Holding |
| International Paper |
Graphic Packaging and International Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graphic Packaging and International Paper
The main advantage of trading using opposite Graphic Packaging and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graphic Packaging 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.| Graphic Packaging vs. International Paper | Graphic Packaging vs. Sonoco Products | Graphic Packaging vs. Reynolds Consumer Products | Graphic Packaging vs. Ball Corporation |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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