Correlation Between Silgan Holdings and International Paper
Can any of the company-specific risk be diversified away by investing in both Silgan Holdings and International 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 Silgan Holdings and International Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silgan Holdings and International Paper, you can compare the effects of market volatilities on Silgan Holdings and International 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 Silgan Holdings with a short position of International Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silgan Holdings and International Paper.
Diversification Opportunities for Silgan Holdings and International Paper
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Silgan and International is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Silgan Holdings and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Silgan Holdings 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 Silgan Holdings are associated (or correlated) with International Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Paper has no effect on the direction of Silgan Holdings i.e., Silgan Holdings and International Paper go up and down completely randomly.
Pair Corralation between Silgan Holdings and International Paper
Given the investment horizon of 90 days Silgan Holdings is expected to generate 1.98 times less return on investment than International Paper. But when comparing it to its historical volatility, Silgan Holdings is 2.58 times less risky than International Paper. It trades about 0.42 of its potential returns per unit of risk. International Paper is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 4,825 in International Paper on August 28, 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 |
Silgan Holdings vs. International Paper
Performance |
| Timeline |
| Silgan Holdings |
| International Paper |
Silgan Holdings and International Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silgan Holdings and International Paper
The main advantage of trading using opposite Silgan Holdings and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silgan Holdings position performs unexpectedly, International 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 International Paper will offset losses from the drop in International Paper's long position.| Silgan Holdings vs. Pactiv Evergreen | Silgan Holdings vs. Myers Industries | Silgan Holdings vs. Sonoco Products | Silgan Holdings vs. Avery Dennison Corp |
| International Paper vs. Sonoco Products | International Paper vs. Reynolds Consumer Products | International Paper vs. Ball Corporation | International Paper vs. Crown Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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