Correlation Between CP ALL and International Paper

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

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

Diversification Opportunities for CP ALL and International Paper

-0.54

Correlation Coefficient

CP ALL  International Paper

Excellent diversification

The 3 months correlation between CVPBF and International is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and CP ALL 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 CP ALL Public 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 CP ALL i.e., CP ALL and International Paper go up and down completely randomly.

Pair Corralation between CP ALL and International Paper

Assuming the 90 days horizon CP ALL Public is expected to generate 1.78 times more return on investment than International Paper. However, CP ALL is 1.78 times more volatile than International Paper. It trades about 0.04 of its potential returns per unit of risk. International Paper is currently generating about 0.06 per unit of risk. If you would invest  158.00  in CP ALL Public on September 26, 2024 and sell it today you would earn a total of  22.00  from holding CP ALL Public or generate 13.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.54%
Values	Daily Returns

CP ALL Public  vs.  International Paper

CP ALL Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 CP ALL and International Paper

The main advantage of trading using opposite CP ALL and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CP ALL 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 CP ALL Public 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.