Correlation Between International Paper and Crown Holdings

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

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

Diversification Opportunities for International Paper and Crown Holdings

0.06

Correlation Coefficient

International Paper  Crown Holdings

Significant diversification

The 3 months correlation between International and Crown is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Crown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Holdings 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 Crown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Holdings has no effect on the direction of International Paper i.e., International Paper and Crown Holdings go up and down completely randomly.

Pair Corralation between International Paper and Crown Holdings

Allowing for the 90-day total investment horizon International Paper is expected to under-perform the Crown Holdings. But the stock apears to be less risky and, when comparing its historical volatility, International Paper is 1.45 times less risky than Crown Holdings. The stock trades about -0.71 of its potential returns per unit of risk. The Crown Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,851  in Crown Holdings on January 27, 2024 and sell it today you would earn a total of  127.00  from holding Crown Holdings or generate 1.62% return on investment over 90 days.

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

International Paper  vs.  Crown Holdings

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 latest inconsistent performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with International Paper and Crown Holdings

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

The idea behind International Paper and Crown Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.