Correlation Between Weibo Corp and International Paper

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

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

Diversification Opportunities for Weibo Corp and International Paper

0.3

Correlation Coefficient

Weibo Corp  International Paper

Weak diversification

The 3 months correlation between Weibo and International is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper and Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and International Paper go up and down completely randomly.

Pair Corralation between Weibo Corp and International Paper

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 2.36 times less return on investment than International Paper. In addition to that, Weibo Corp is 15.78 times more volatile than International Paper. It trades about 0.0 of its total potential returns per unit of risk. International Paper is currently generating about 0.17 per unit of volatility. If you would invest  7,500  in International Paper on September 29, 2024 and sell it today you would earn a total of  100.00  from holding International Paper or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	53.97%
Values	Daily Returns

Weibo Corp  vs.  International Paper

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Weibo Corp is not utilizing all of its potentials. The current stock price disturbance, 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 Weibo Corp and International Paper

The main advantage of trading using opposite Weibo Corp and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.