Correlation Between Gap, and International Paper

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

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

Diversification Opportunities for Gap, and International Paper

0.83

Correlation Coefficient

Gap,  International Paper

Very poor diversification

The 3 months correlation between Gap, and International is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Gap, 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 The Gap, 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 Gap, i.e., Gap, and International Paper go up and down completely randomly.

Pair Corralation between Gap, and International Paper

If you would invest  2,167  in The Gap, on October 9, 2024 and sell it today you would earn a total of  241.00  from holding The Gap, or generate 11.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	12.82%
Values	Daily Returns

The Gap,  vs.  International Paper

Gap,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported 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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Gap, and International Paper

The main advantage of trading using opposite Gap, and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.