Correlation Between Armada Hflr and International Paper

Can any of the company-specific risk be diversified away by investing in both Armada Hflr 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 Armada Hflr and International Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hflr Pr and International Paper, you can compare the effects of market volatilities on Armada Hflr 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 Armada Hflr with a short position of International Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and International Paper.

Diversification Opportunities for Armada Hflr and International Paper

-0.49

Correlation Coefficient

Armada Hflr  International Paper

Very good diversification

The 3 months correlation between Armada and International is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and International Paper go up and down completely randomly.

Pair Corralation between Armada Hflr and International Paper

Considering the 90-day investment horizon Armada Hflr is expected to generate 2.02 times less return on investment than International Paper. But when comparing it to its historical volatility, Armada Hflr Pr is 1.66 times less risky than International Paper. It trades about 0.01 of its potential returns per unit of risk. International Paper is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,700  in International Paper on September 27, 2024 and sell it today you would lose (100.00) from holding International Paper or give up 1.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	56.34%
Values	Daily Returns

Armada Hflr Pr  vs.  International Paper

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Armada Hflr is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

International Paper

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days International Paper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, International Paper is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Armada Hflr and International Paper

The main advantage of trading using opposite Armada Hflr and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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.

The idea behind Armada Hflr Pr and International Paper pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.