Correlation Between Boot Barn and International Paper

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

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

Diversification Opportunities for Boot Barn and International Paper

-0.13

Correlation Coefficient

Boot Barn  International Paper

Good diversification

The 3 months correlation between Boot and International is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Boot Barn 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 Boot Barn Holdings 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 Boot Barn i.e., Boot Barn and International Paper go up and down completely randomly.

Pair Corralation between Boot Barn and International Paper

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 1.08 times more return on investment than International Paper. However, Boot Barn is 1.08 times more volatile than International Paper. It trades about 0.09 of its potential returns per unit of risk. International Paper is currently generating about 0.06 per unit of risk. If you would invest  8,103  in Boot Barn Holdings on October 5, 2024 and sell it today you would earn a total of  7,747  from holding Boot Barn Holdings or generate 95.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.77%
Values	Daily Returns

Boot Barn Holdings  vs.  International Paper

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Boot Barn is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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

Pair Trading with Boot Barn and International Paper

The main advantage of trading using opposite Boot Barn and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boot Barn 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 Boot Barn Holdings 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.