Correlation Between BOS Better and International Paper

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

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

Diversification Opportunities for BOS Better and International Paper

0.45

Correlation Coefficient

BOS Better  International Paper

Very weak diversification

The 3 months correlation between BOS and International is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding BOS Better Online and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and BOS Better 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 BOS Better Online 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 BOS Better i.e., BOS Better and International Paper go up and down completely randomly.

Pair Corralation between BOS Better and International Paper

Given the investment horizon of 90 days BOS Better is expected to generate 1.54 times less return on investment than International Paper. In addition to that, BOS Better is 1.38 times more volatile than International Paper. It trades about 0.03 of its total potential returns per unit of risk. International Paper is currently generating about 0.07 per unit of volatility. If you would invest  3,251  in International Paper on August 19, 2024 and sell it today you would earn a total of  2,507  from holding International Paper or generate 77.11% return on investment over 90 days.

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

BOS Better Online  vs.  International Paper

BOS Better Online

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOS Better Online are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, BOS Better may actually be approaching a critical reversion point that can send shares even higher in December 2024.

International Paper

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Paper are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, International Paper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BOS Better and International Paper

The main advantage of trading using opposite BOS Better and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOS Better 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 BOS Better Online 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.