Correlation Between International Paper and Reynolds Consumer
Can any of the company-specific risk be diversified away by investing in both International Paper and Reynolds Consumer 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 Reynolds Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Paper and Reynolds Consumer Products, you can compare the effects of market volatilities on International Paper and Reynolds Consumer 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 Reynolds Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Paper and Reynolds Consumer.
Diversification Opportunities for International Paper and Reynolds Consumer
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between International and Reynolds is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Reynolds Consumer Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reynolds Consumer 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 Reynolds Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reynolds Consumer has no effect on the direction of International Paper i.e., International Paper and Reynolds Consumer go up and down completely randomly.
Pair Corralation between International Paper and Reynolds Consumer
Allowing for the 90-day total investment horizon International Paper is expected to generate 1.62 times more return on investment than Reynolds Consumer. However, International Paper is 1.62 times more volatile than Reynolds Consumer Products. It trades about 0.07 of its potential returns per unit of risk. Reynolds Consumer Products is currently generating about -0.01 per unit of risk. If you would invest 3,318 in International Paper on August 24, 2024 and sell it today you would earn a total of 2,600 from holding International Paper or generate 78.36% 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. Reynolds Consumer Products
Performance |
| Timeline |
| International Paper |
| Reynolds Consumer |
International Paper and Reynolds Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Paper and Reynolds Consumer
The main advantage of trading using opposite International Paper and Reynolds Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Paper position performs unexpectedly, Reynolds Consumer 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 Reynolds Consumer will offset losses from the drop in Reynolds Consumer's long position.| International Paper vs. Sealed Air | International Paper vs. Avery Dennison Corp | International Paper vs. Sonoco Products | International Paper vs. Ball Corporation |
| Reynolds Consumer vs. Greif Bros | Reynolds Consumer vs. Karat Packaging | Reynolds Consumer vs. Silgan Holdings | Reynolds Consumer 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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