Correlation Between International Paper and Albany International

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

Diversification Opportunities for International Paper and Albany International

0.4

Correlation Coefficient

International Paper  Albany International

Very weak diversification

The 3 months correlation between International and Albany is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Albany International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albany 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 Albany International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albany International has no effect on the direction of International Paper i.e., International Paper and Albany International go up and down completely randomly.

Pair Corralation between International Paper and Albany International

Allowing for the 90-day total investment horizon International Paper is expected to under-perform the Albany International. But the stock apears to be less risky and, when comparing its historical volatility, International Paper is 1.44 times less risky than Albany International. The stock trades about -0.27 of its potential returns per unit of risk. The Albany International is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  8,279  in Albany International on September 27, 2024 and sell it today you would lose (249.00) from holding Albany International or give up 3.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

International Paper  vs.  Albany International

International Paper

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Paper are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, International Paper reported solid returns over the last few months and may actually be approaching a breakup point.

Albany International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albany International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Albany 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 Paper and Albany International

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

The idea behind International Paper and Albany 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.

Check out your portfolio center.

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.