Correlation Between International Paper and Consumer Discretionary

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

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

Diversification Opportunities for International Paper and Consumer Discretionary

0.86

Correlation Coefficient

International Paper  Consumer Discretionary

Very poor diversification

The 3 months correlation between International and Consumer is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Consumer Discretionary Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary 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 Consumer Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of International Paper i.e., International Paper and Consumer Discretionary go up and down completely randomly.

Pair Corralation between International Paper and Consumer Discretionary

Allowing for the 90-day total investment horizon International Paper is expected to generate 1.34 times less return on investment than Consumer Discretionary. In addition to that, International Paper is 1.89 times more volatile than Consumer Discretionary Portfolio. It trades about 0.05 of its total potential returns per unit of risk. Consumer Discretionary Portfolio is currently generating about 0.12 per unit of volatility. If you would invest  5,855  in Consumer Discretionary Portfolio on May 5, 2025 and sell it today you would earn a total of  600.00  from holding Consumer Discretionary Portfolio or generate 10.25% return on investment over 90 days.

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

International Paper  vs.  Consumer Discretionary Portfol

International Paper

Risk-Adjusted Performance

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 fragile basic indicators, International Paper may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Consumer Discretionary

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Portfolio are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Consumer Discretionary may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with International Paper and Consumer Discretionary

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

The idea behind International Paper and Consumer Discretionary Portfolio 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.