Correlation Between International Flavors and RPM International

Can any of the company-specific risk be diversified away by investing in both International Flavors and RPM International 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 RPM International 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 RPM International, you can compare the effects of market volatilities on International Flavors and RPM International 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 RPM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Flavors and RPM International.

Diversification Opportunities for International Flavors and RPM International

0.77

Correlation Coefficient

International Flavors  RPM International

Poor diversification

The 3 months correlation between International and RPM is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International 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 RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of International Flavors i.e., International Flavors and RPM International go up and down completely randomly.

Pair Corralation between International Flavors and RPM International

Considering the 90-day investment horizon International Flavors Fragrances is expected to under-perform the RPM International. In addition to that, International Flavors is 1.02 times more volatile than RPM International. It trades about -0.1 of its total potential returns per unit of risk. RPM International is currently generating about -0.06 per unit of volatility. If you would invest  12,264  in RPM International on December 29, 2024 and sell it today you would lose (627.00) from holding RPM International or give up 5.11% 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.  RPM International

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.

RPM International

Risk-Adjusted Performance

Very Weak

Over the last 90 days RPM International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, RPM International is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with International Flavors and RPM International

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

The idea behind International Flavors Fragrances and RPM International 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.