Correlation Between International Paper and Aluminum

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

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

Diversification Opportunities for International Paper and Aluminum

0.16

Correlation Coefficient

International Paper  Aluminum

Average diversification

The 3 months correlation between International and Aluminum is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum and International Paper 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 Paper are associated (or correlated) with Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of International Paper i.e., International Paper and Aluminum go up and down completely randomly.

Pair Corralation between International Paper and Aluminum

Assuming the 90 days horizon International Paper is expected to generate 0.05 times more return on investment than Aluminum. However, International Paper is 19.37 times less risky than Aluminum. It trades about 0.19 of its potential returns per unit of risk. Aluminum of is currently generating about -0.1 per unit of risk. If you would invest  7,500  in International Paper on October 7, 2024 and sell it today you would earn a total of  100.00  from holding International Paper or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	47.54%
Values	Daily Returns

International Paper  vs.  Aluminum of

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with International Paper and Aluminum

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

The idea behind International Paper and Aluminum of 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.