Correlation Between Waters and International Paper
Can any of the company-specific risk be diversified away by investing in both Waters 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 Waters and International Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waters and International Paper, you can compare the effects of market volatilities on Waters 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 Waters with a short position of International Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and International Paper.
Diversification Opportunities for Waters and International Paper
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waters and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Waters and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Waters 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 Waters 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 Waters i.e., Waters and International Paper go up and down completely randomly.
Pair Corralation between Waters and International Paper
If you would invest 38,734 in Waters on September 5, 2024 and sell it today you would earn a total of 401.00 from holding Waters or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 40.91% |
| Values | Daily Returns |
Waters vs. International Paper
Performance |
| Timeline |
| Waters |
| International Paper |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Waters and International Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waters and International Paper
The main advantage of trading using opposite Waters and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters 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.| Waters vs. IDEXX Laboratories | Waters vs. IQVIA Holdings | Waters vs. Charles River Laboratories | Waters vs. Revvity |
| International Paper vs. SunLink Health Systems | International Paper vs. Neogen | International Paper vs. Xponential Fitness | International Paper vs. Waters |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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