Correlation Between Mercer International and Clearwater Paper
Can any of the company-specific risk be diversified away by investing in both Mercer International and Clearwater 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 Mercer International and Clearwater Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercer International and Clearwater Paper, you can compare the effects of market volatilities on Mercer International and Clearwater 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 Mercer International with a short position of Clearwater Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercer International and Clearwater Paper.
Diversification Opportunities for Mercer International and Clearwater Paper
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mercer and Clearwater is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mercer International and Clearwater Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Paper and Mercer International 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 Mercer International are associated (or correlated) with Clearwater Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Paper has no effect on the direction of Mercer International i.e., Mercer International and Clearwater Paper go up and down completely randomly.
Pair Corralation between Mercer International and Clearwater Paper
Given the investment horizon of 90 days Mercer International is expected to generate 0.88 times more return on investment than Clearwater Paper. However, Mercer International is 1.14 times less risky than Clearwater Paper. It trades about -0.1 of its potential returns per unit of risk. Clearwater Paper is currently generating about -0.14 per unit of risk. If you would invest 967.00 in Mercer International on August 25, 2024 and sell it today you would lose (327.00) from holding Mercer International or give up 33.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercer International vs. Clearwater Paper
Performance |
| Timeline |
| Mercer International |
| Clearwater Paper |
Mercer International and Clearwater Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercer International and Clearwater Paper
The main advantage of trading using opposite Mercer International and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercer International position performs unexpectedly, Clearwater 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 Clearwater Paper will offset losses from the drop in Clearwater Paper's long position.| Mercer International vs. Sylvamo Corp | Mercer International vs. Suzano Papel e | Mercer International vs. UPM Kymmene Oyj | Mercer International vs. Clearwater Paper |
| Clearwater Paper vs. Sylvamo Corp | Clearwater Paper vs. Suzano Papel e | Clearwater Paper vs. Klabin Sa A | Clearwater Paper vs. Mercer International |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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