Correlation Between International Paper and Myers Industries

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

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

Diversification Opportunities for International Paper and Myers Industries

-0.71

Correlation Coefficient

International Paper  Myers Industries

Pay attention - limited upside

The 3 months correlation between International and Myers is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Myers Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Myers Industries 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 Myers Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Myers Industries has no effect on the direction of International Paper i.e., International Paper and Myers Industries go up and down completely randomly.

Pair Corralation between International Paper and Myers Industries

Allowing for the 90-day total investment horizon International Paper is expected to generate 0.79 times more return on investment than Myers Industries. However, International Paper is 1.27 times less risky than Myers Industries. It trades about 0.1 of its potential returns per unit of risk. Myers Industries is currently generating about -0.05 per unit of risk. If you would invest  2,968  in International Paper on October 4, 2024 and sell it today you would earn a total of  2,414  from holding International Paper or generate 81.33% return on investment over 90 days.

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

International Paper  vs.  Myers Industries

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.

Myers Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Myers Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with International Paper and Myers Industries

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

The idea behind International Paper and Myers Industries 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.