Correlation Between Aluminumof China and International Paper

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

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

Diversification Opportunities for Aluminumof China and International Paper

0.0

Correlation Coefficient

Aluminumof China  International Paper

Pay attention - limited upside

The 3 months correlation between Aluminumof and International is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and International Paper go up and down completely randomly.

Pair Corralation between Aluminumof China and International Paper

If you would invest  53.00  in Aluminum of on December 27, 2024 and sell it today you would earn a total of  15.00  from holding Aluminum of or generate 28.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Aluminum of  vs.  International Paper

Aluminumof China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Aluminumof China reported solid returns over the last few months and may actually be approaching a breakup point.

International Paper

Risk-Adjusted Performance

Very Weak

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aluminumof China and International Paper

The main advantage of trading using opposite Aluminumof China and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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 Aluminum of 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.