Correlation Between Antero Midstream and International Paper

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

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

Diversification Opportunities for Antero Midstream and International Paper

0.71

Correlation Coefficient

Antero Midstream  International Paper

Poor diversification

The 3 months correlation between Antero and International is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Antero Midstream 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 Antero Midstream Partners 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 Antero Midstream i.e., Antero Midstream and International Paper go up and down completely randomly.

Pair Corralation between Antero Midstream and International Paper

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 7.1 times more return on investment than International Paper. However, Antero Midstream is 7.1 times more volatile than International Paper. It trades about 0.05 of its potential returns per unit of risk. International Paper is currently generating about 0.15 per unit of risk. If you would invest  1,447  in Antero Midstream Partners on September 13, 2024 and sell it today you would earn a total of  59.00  from holding Antero Midstream Partners or generate 4.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	70.31%
Values	Daily Returns

Antero Midstream Partners  vs.  International Paper

Antero Midstream Partners

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

International Paper

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Antero Midstream and International Paper

The main advantage of trading using opposite Antero Midstream and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antero Midstream 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 Antero Midstream Partners 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.