Correlation Between Intel and International Paper

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

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

Diversification Opportunities for Intel and International Paper

-0.61

Correlation Coefficient

Intel  International Paper

Excellent diversification

The 3 months correlation between Intel and International is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Intel and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Intel 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 Intel are associated (or correlated) with International Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Paper has no effect on the direction of Intel i.e., Intel and International Paper go up and down completely randomly.

Pair Corralation between Intel and International Paper

Given the investment horizon of 90 days Intel is expected to under-perform the International Paper. In addition to that, Intel is 1.01 times more volatile than International Paper. It trades about -0.01 of its total potential returns per unit of risk. International Paper is currently generating about 0.01 per unit of volatility. If you would invest  7,800  in International Paper on October 5, 2024 and sell it today you would lose (200.00) from holding International Paper or give up 2.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	51.43%
Values	Daily Returns

Intel  vs.  International Paper

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Intel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Intel and International Paper

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

The idea behind Intel and International Paper 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.