Correlation Between International Paper and Treasury Wine

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

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

Diversification Opportunities for International Paper and Treasury Wine

-0.67

Correlation Coefficient

International Paper  Treasury Wine

Excellent diversification

The 3 months correlation between International and Treasury is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of International Paper i.e., International Paper and Treasury Wine go up and down completely randomly.

Pair Corralation between International Paper and Treasury Wine

Assuming the 90 days horizon International Paper is expected to generate 0.69 times more return on investment than Treasury Wine. However, International Paper is 1.44 times less risky than Treasury Wine. It trades about 0.01 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about 0.0 per unit of risk. If you would invest  7,700  in International Paper on September 26, 2024 and sell it today you would lose (100.00) from holding International Paper or give up 1.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	73.75%
Values	Daily Returns

International Paper  vs.  Treasury Wine Estates

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

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Treasury Wine is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Paper and Treasury Wine

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

The idea behind International Paper and Treasury Wine Estates 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.