Correlation Between International Paper and Hovnanian Enterprises
Can any of the company-specific risk be diversified away by investing in both International Paper and Hovnanian Enterprises 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 Paper and Hovnanian Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Paper and Hovnanian Enterprises PFD, you can compare the effects of market volatilities on International Paper and Hovnanian Enterprises 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 Paper with a short position of Hovnanian Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Paper and Hovnanian Enterprises.
Diversification Opportunities for International Paper and Hovnanian Enterprises
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Hovnanian is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Hovnanian Enterprises PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hovnanian Enterprises PFD and International Paper 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 Paper are associated (or correlated) with Hovnanian Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hovnanian Enterprises PFD has no effect on the direction of International Paper i.e., International Paper and Hovnanian Enterprises go up and down completely randomly.
Pair Corralation between International Paper and Hovnanian Enterprises
Allowing for the 90-day total investment horizon International Paper is expected to under-perform the Hovnanian Enterprises. In addition to that, International Paper is 4.05 times more volatile than Hovnanian Enterprises PFD. It trades about -0.08 of its total potential returns per unit of risk. Hovnanian Enterprises PFD is currently generating about 0.16 per unit of volatility. If you would invest 1,715 in Hovnanian Enterprises PFD on December 25, 2024 and sell it today you would earn a total of 33.00 from holding Hovnanian Enterprises PFD or generate 1.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Paper vs. Hovnanian Enterprises PFD
Performance |
| Timeline |
| International Paper |
| Hovnanian Enterprises PFD |
International Paper and Hovnanian Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Paper and Hovnanian Enterprises
The main advantage of trading using opposite International Paper and Hovnanian Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Paper position performs unexpectedly, Hovnanian Enterprises 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 Hovnanian Enterprises will offset losses from the drop in Hovnanian Enterprises' long position.| International Paper vs. Sealed Air | International Paper vs. Avery Dennison Corp | International Paper vs. Sonoco Products | International Paper vs. Ball Corporation |
| Hovnanian Enterprises vs. Beazer Homes USA | Hovnanian Enterprises vs. KB Home | Hovnanian Enterprises vs. MI Homes | Hovnanian Enterprises vs. Taylor Morn Home |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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