Correlation Between Oaktree Capital and International Paper

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

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

Diversification Opportunities for Oaktree Capital and International Paper

-0.71

Correlation Coefficient

Oaktree Capital  International Paper

Pay attention - limited upside

The 3 months correlation between Oaktree and International is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Oaktree Capital Group and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Oaktree Capital 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 Oaktree Capital Group 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 Oaktree Capital i.e., Oaktree Capital and International Paper go up and down completely randomly.

Pair Corralation between Oaktree Capital and International Paper

Assuming the 90 days trading horizon Oaktree Capital is expected to generate 1.54 times less return on investment than International Paper. But when comparing it to its historical volatility, Oaktree Capital Group is 2.07 times less risky than International Paper. It trades about 0.02 of its potential returns per unit of risk. International Paper is currently generating about 0.01 of returns per unit of risk over similar time horizon. 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	56.65%
Values	Daily Returns

Oaktree Capital Group  vs.  International Paper

Oaktree Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oaktree Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Oaktree Capital and International Paper

The main advantage of trading using opposite Oaktree Capital and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oaktree Capital 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 Oaktree Capital Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.