Correlation Between International Paper and Avery Dennison

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

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

Diversification Opportunities for International Paper and Avery Dennison

0.58

Correlation Coefficient

International Paper  Avery Dennison

Very weak diversification

The 3 months correlation between International and Avery is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Avery Dennison Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison Corp 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 Avery Dennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avery Dennison Corp has no effect on the direction of International Paper i.e., International Paper and Avery Dennison go up and down completely randomly.

Pair Corralation between International Paper and Avery Dennison

Allowing for the 90-day total investment horizon International Paper is expected to generate 1.2 times more return on investment than Avery Dennison. However, International Paper is 1.2 times more volatile than Avery Dennison Corp. It trades about -0.05 of its potential returns per unit of risk. Avery Dennison Corp is currently generating about -0.14 per unit of risk. If you would invest  5,834  in International Paper on November 28, 2024 and sell it today you would lose (304.00) from holding International Paper or give up 5.21% 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.  Avery Dennison Corp

International Paper

Risk-Adjusted Performance

Very Weak

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.

Avery Dennison Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avery Dennison Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with International Paper and Avery Dennison

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

The idea behind International Paper and Avery Dennison Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..