Correlation Between International Paper and Airport City

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Can any of the company-specific risk be diversified away by investing in both International Paper and Airport City 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 Airport City into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Paper and Airport City, you can compare the effects of market volatilities on International Paper and Airport City 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 Airport City. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Paper and Airport City.

Diversification Opportunities for International Paper and Airport City

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between International and Airport is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Airport City in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airport City 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 Airport City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airport City has no effect on the direction of International Paper i.e., International Paper and Airport City go up and down completely randomly.

Pair Corralation between International Paper and Airport City

Allowing for the 90-day total investment horizon International Paper is expected to generate 1.79 times more return on investment than Airport City. However, International Paper is 1.79 times more volatile than Airport City. It trades about 0.18 of its potential returns per unit of risk. Airport City is currently generating about -0.06 per unit of risk. If you would invest  3,420  in International Paper on December 29, 2023 and sell it today you would earn a total of  400.00  from holding International Paper or generate 11.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy77.27%
ValuesDaily Returns

International Paper  vs.  Airport City

 Performance 
       Timeline  
International Paper 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in International Paper are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, International Paper may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Airport City 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Airport City has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

International Paper and Airport City Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Paper and Airport City

The main advantage of trading using opposite International Paper and Airport City positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Paper position performs unexpectedly, Airport City 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 Airport City will offset losses from the drop in Airport City's long position.
The idea behind International Paper and Airport City 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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