Correlation Between International Paper and Sapiens International

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

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

Diversification Opportunities for International Paper and Sapiens International

-0.75

Correlation Coefficient

International Paper  Sapiens International

Pay attention - limited upside

The 3 months correlation between International and Sapiens is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Sapiens International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapiens International 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 Sapiens International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapiens International has no effect on the direction of International Paper i.e., International Paper and Sapiens International go up and down completely randomly.

Pair Corralation between International Paper and Sapiens International

Assuming the 90 days horizon International Paper is expected to generate 3.08 times less return on investment than Sapiens International. In addition to that, International Paper is 1.22 times more volatile than Sapiens International. It trades about 0.01 of its total potential returns per unit of risk. Sapiens International is currently generating about 0.04 per unit of volatility. If you would invest  1,941  in Sapiens International on September 29, 2024 and sell it today you would earn a total of  772.00  from holding Sapiens International or generate 39.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	56.25%
Values	Daily Returns

International Paper  vs.  Sapiens International

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

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with International Paper and Sapiens International

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

The idea behind International Paper and Sapiens 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.