Correlation Between International Flavors and Koppers Holdings

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

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

Diversification Opportunities for International Flavors and Koppers Holdings

0.73

Correlation Coefficient

International Flavors  Koppers Holdings

Poor diversification

The 3 months correlation between International and Koppers is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc and Koppers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koppers Holdings and International Flavors 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 International Flavors Fragrances are associated (or correlated) with Koppers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koppers Holdings has no effect on the direction of International Flavors i.e., International Flavors and Koppers Holdings go up and down completely randomly.

Pair Corralation between International Flavors and Koppers Holdings

Considering the 90-day investment horizon International Flavors Fragrances is expected to generate 0.6 times more return on investment than Koppers Holdings. However, International Flavors Fragrances is 1.65 times less risky than Koppers Holdings. It trades about -0.17 of its potential returns per unit of risk. Koppers Holdings is currently generating about -0.15 per unit of risk. If you would invest  9,093  in International Flavors Fragrances on November 29, 2024 and sell it today you would lose (1,036) from holding International Flavors Fragrances or give up 11.39% of portfolio value over 90 days.

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

International Flavors Fragranc  vs.  Koppers Holdings

International Flavors

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Flavors Fragrances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Koppers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Koppers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with International Flavors and Koppers Holdings

The main advantage of trading using opposite International Flavors and Koppers Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Flavors position performs unexpectedly, Koppers Holdings 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 Koppers Holdings will offset losses from the drop in Koppers Holdings' long position.

The idea behind International Flavors Fragrances and Koppers Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.