Correlation Between International Paper and AptarGroup

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

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

Diversification Opportunities for International Paper and AptarGroup

0.35

Correlation Coefficient

International Paper  AptarGroup

Weak diversification

The 3 months correlation between International and AptarGroup is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and AptarGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AptarGroup 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 AptarGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AptarGroup has no effect on the direction of International Paper i.e., International Paper and AptarGroup go up and down completely randomly.

Pair Corralation between International Paper and AptarGroup

Allowing for the 90-day total investment horizon International Paper is expected to generate 3.7 times more return on investment than AptarGroup. However, International Paper is 3.7 times more volatile than AptarGroup. It trades about 0.0 of its potential returns per unit of risk. AptarGroup is currently generating about -0.03 per unit of risk. If you would invest  3,473  in International Paper on January 24, 2024 and sell it today you would lose (32.00) from holding International Paper or give up 0.92% of portfolio value over 90 days.

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

International Paper  vs.  AptarGroup

International Paper

Risk-Adjusted Performance

0 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

AptarGroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AptarGroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, AptarGroup may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with International Paper and AptarGroup

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

The idea behind International Paper and AptarGroup 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.