Correlation Between International Paper and Silgan Holdings

Can any of the company-specific risk be diversified away by investing in both International Paper and Silgan 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 Silgan 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 Silgan Holdings, you can compare the effects of market volatilities on International Paper and Silgan 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 Silgan Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Paper and Silgan Holdings.

Diversification Opportunities for International Paper and Silgan Holdings

0.89

Correlation Coefficient

International Paper  Silgan Holdings

Very poor diversification

The 3 months correlation between International and Silgan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding International Paper and Silgan Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silgan 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 Silgan Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silgan Holdings has no effect on the direction of International Paper i.e., International Paper and Silgan Holdings go up and down completely randomly.

Pair Corralation between International Paper and Silgan Holdings

Allowing for the 90-day total investment horizon International Paper is expected to generate 2.02 times more return on investment than Silgan Holdings. However, International Paper is 2.02 times more volatile than Silgan Holdings. It trades about 0.16 of its potential returns per unit of risk. Silgan Holdings is currently generating about 0.18 per unit of risk. If you would invest  4,738  in International Paper on September 3, 2024 and sell it today you would earn a total of  1,108  from holding International Paper or generate 23.39% 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.  Silgan Holdings

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 weak basic indicators, International Paper reported solid returns over the last few months and may actually be approaching a breakup point.

Silgan Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Silgan Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Silgan Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with International Paper and Silgan Holdings

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

The idea behind International Paper and Silgan 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.