Correlation Between Sealed Air and International Paper

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

Diversification Opportunities for Sealed Air and International Paper

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sealed and International is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Sealed Air 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 Sealed Air 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 Sealed Air i.e., Sealed Air and International Paper go up and down completely randomly.

Pair Corralation between Sealed Air and International Paper

Considering the 90-day investment horizon Sealed Air is expected to under-perform the International Paper. In addition to that, Sealed Air is 1.15 times more volatile than International Paper. It trades about -0.04 of its total potential returns per unit of risk. International Paper is currently generating about 0.0 per unit of volatility. If you would invest  4,275  in International Paper on December 30, 2023 and sell it today you would lose (373.00) from holding International Paper or give up 8.73% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sealed Air  vs.  International Paper

 Performance 
       Timeline  
Sealed Air 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
International Paper 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in International Paper are ranked lower than 4 (%) 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.

Sealed Air and International Paper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sealed Air and International Paper

The main advantage of trading using opposite Sealed Air and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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 Sealed Air 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.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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