Correlation Between Unifi and International Paper

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

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

Diversification Opportunities for Unifi and International Paper

-0.87

Correlation Coefficient

Unifi  International Paper

Pay attention - limited upside

The 3 months correlation between Unifi and International is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Unifi Inc and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Unifi 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 Unifi Inc 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 Unifi i.e., Unifi and International Paper go up and down completely randomly.

Pair Corralation between Unifi and International Paper

Considering the 90-day investment horizon Unifi Inc is expected to under-perform the International Paper. In addition to that, Unifi is 1.48 times more volatile than International Paper. It trades about -0.07 of its total potential returns per unit of risk. International Paper is currently generating about 0.09 per unit of volatility. If you would invest  4,943  in International Paper on September 16, 2024 and sell it today you would earn a total of  611.00  from holding International Paper or generate 12.36% return on investment over 90 days.

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

Unifi Inc  vs.  International Paper

Unifi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unifi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Unifi and International Paper

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