Correlation Between Cerberus Cyber and International Paper

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

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

Diversification Opportunities for Cerberus Cyber and International Paper

0.85

Correlation Coefficient

Cerberus Cyber  International Paper

Very poor diversification

The 3 months correlation between Cerberus and International is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cerberus Cyber Sentinel and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Cerberus Cyber 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 Cerberus Cyber Sentinel 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 Cerberus Cyber i.e., Cerberus Cyber and International Paper go up and down completely randomly.

Pair Corralation between Cerberus Cyber and International Paper

Given the investment horizon of 90 days Cerberus Cyber Sentinel is expected to under-perform the International Paper. In addition to that, Cerberus Cyber is 3.26 times more volatile than International Paper. It trades about -0.03 of its total potential returns per unit of risk. International Paper is currently generating about 0.01 per unit of volatility. If you would invest  7,700  in International Paper on September 26, 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 Together
Strength	Strong
Accuracy	56.65%
Values	Daily Returns

Cerberus Cyber Sentinel  vs.  International Paper

Cerberus Cyber Sentinel

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cerberus Cyber Sentinel are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Cerberus Cyber displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Cerberus Cyber and International Paper

The main advantage of trading using opposite Cerberus Cyber and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cerberus Cyber 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 Cerberus Cyber Sentinel 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.