Correlation Between International Flavors and RPM International
Can any of the company-specific risk be diversified away by investing in both International Flavors and RPM International 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 International Flavors and RPM International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Flavors Fragrances and RPM International, you can compare the effects of market volatilities on International Flavors and RPM International 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 International Flavors with a short position of RPM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Flavors and RPM International.
Diversification Opportunities for International Flavors and RPM International
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and RPM is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International and International Flavors 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 International Flavors Fragrances are associated (or correlated) with RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of International Flavors i.e., International Flavors and RPM International go up and down completely randomly.
Pair Corralation between International Flavors and RPM International
Considering the 90-day investment horizon International Flavors is expected to generate 1.45 times less return on investment than RPM International. In addition to that, International Flavors is 1.18 times more volatile than RPM International. It trades about 0.03 of its total potential returns per unit of risk. RPM International is currently generating about 0.05 per unit of volatility. If you would invest 10,535 in RPM International on November 9, 2024 and sell it today you would earn a total of 1,817 from holding RPM International or generate 17.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Flavors Fragranc vs. RPM International
Performance |
| Timeline |
| International Flavors |
| RPM International |
International Flavors and RPM International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Flavors and RPM International
The main advantage of trading using opposite International Flavors and RPM International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Flavors position performs unexpectedly, RPM International 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 RPM International will offset losses from the drop in RPM International's long position.| International Flavors vs. LyondellBasell Industries NV | International Flavors vs. Cabot | International Flavors vs. Westlake Chemical | International Flavors vs. Air Products and |
| RPM International vs. Innospec | RPM International vs. Minerals Technologies | RPM International vs. Oil Dri | RPM International vs. Quaker Chemical |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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