Correlation Between International Paper and Karat Packaging
Can any of the company-specific risk be diversified away by investing in both International Paper and Karat Packaging 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 Karat Packaging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Paper and Karat Packaging, you can compare the effects of market volatilities on International Paper and Karat Packaging 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 Karat Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Paper and Karat Packaging.
Diversification Opportunities for International Paper and Karat Packaging
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Karat is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging 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 Karat Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karat Packaging has no effect on the direction of International Paper i.e., International Paper and Karat Packaging go up and down completely randomly.
Pair Corralation between International Paper and Karat Packaging
Allowing for the 90-day total investment horizon International Paper is expected to generate 1.29 times more return on investment than Karat Packaging. However, International Paper is 1.29 times more volatile than Karat Packaging. It trades about 0.33 of its potential returns per unit of risk. Karat Packaging is currently generating about 0.32 per unit of risk. 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 Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Paper vs. Karat Packaging
Performance |
| Timeline |
| International Paper |
| Karat Packaging |
International Paper and Karat Packaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Paper and Karat Packaging
The main advantage of trading using opposite International Paper and Karat Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Paper position performs unexpectedly, Karat Packaging 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 Karat Packaging will offset losses from the drop in Karat Packaging's long position.| International Paper vs. Sealed Air | International Paper vs. Avery Dennison Corp | International Paper vs. Sonoco Products | International Paper vs. Ball Corporation |
| Karat Packaging vs. Greif Bros | Karat Packaging vs. Reynolds Consumer Products | Karat Packaging vs. Silgan Holdings | Karat Packaging vs. O I Glass |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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