Correlation Between Ball and International Paper

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

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

Diversification Opportunities for Ball and International Paper

0.22

Correlation Coefficient

Ball  International Paper

Modest diversification

The 3 months correlation between Ball and International is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ball Corp. and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Ball 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 Ball Corporation 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 Ball i.e., Ball and International Paper go up and down completely randomly.

Pair Corralation between Ball and International Paper

Given the investment horizon of 90 days Ball Corporation is expected to under-perform the International Paper. But the stock apears to be less risky and, when comparing its historical volatility, Ball Corporation is 1.25 times less risky than International Paper. The stock trades about -0.05 of its potential returns per unit of risk. The International Paper is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,321  in International Paper on December 30, 2024 and sell it today you would earn a total of  0.00  from holding International Paper or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ball Corp.  vs.  International Paper

Ball

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ball Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Ball is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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

Pair Trading with Ball and International Paper

The main advantage of trading using opposite Ball and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ball 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 Ball Corporation 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.