Correlation Between Sappi and Clearwater Paper
Can any of the company-specific risk be diversified away by investing in both Sappi 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 Sappi and Clearwater Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sappi Ltd ADR and Clearwater Paper, you can compare the effects of market volatilities on Sappi 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 Sappi with a short position of Clearwater Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sappi and Clearwater Paper.
Diversification Opportunities for Sappi and Clearwater Paper
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sappi and Clearwater is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sappi Ltd ADR and Clearwater Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Paper and Sappi 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 Sappi Ltd ADR 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 Sappi i.e., Sappi and Clearwater Paper go up and down completely randomly.
Pair Corralation between Sappi and Clearwater Paper
Assuming the 90 days horizon Sappi Ltd ADR is expected to generate 1.75 times more return on investment than Clearwater Paper. However, Sappi is 1.75 times more volatile than Clearwater Paper. It trades about 0.07 of its potential returns per unit of risk. Clearwater Paper is currently generating about -0.02 per unit of risk. If you would invest 275.00 in Sappi Ltd ADR on August 29, 2024 and sell it today you would earn a total of 26.00 from holding Sappi Ltd ADR or generate 9.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 8.47% |
| Values | Daily Returns |
Sappi Ltd ADR vs. Clearwater Paper
Performance |
| Timeline |
| Sappi Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Clearwater Paper |
Sappi and Clearwater Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sappi and Clearwater Paper
The main advantage of trading using opposite Sappi and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sappi 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.| Sappi vs. Nine Dragons Paper | Sappi vs. Nine Dragons Paper | Sappi vs. Mondi PLC ADR | Sappi vs. Klabin Sa A |
| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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