Correlation Between Ingersoll Rand and Clearwater Paper

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Can any of the company-specific risk be diversified away by investing in both Ingersoll Rand and Clearwater 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 Ingersoll Rand and Clearwater Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ingersoll Rand and Clearwater Paper, you can compare the effects of market volatilities on Ingersoll Rand and Clearwater 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 Ingersoll Rand with a short position of Clearwater Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingersoll Rand and Clearwater Paper.

Diversification Opportunities for Ingersoll Rand and Clearwater Paper

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Ingersoll and Clearwater is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ingersoll Rand and Clearwater Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Paper and Ingersoll Rand 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 Ingersoll Rand are associated (or correlated) with Clearwater Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Paper has no effect on the direction of Ingersoll Rand i.e., Ingersoll Rand and Clearwater Paper go up and down completely randomly.

Pair Corralation between Ingersoll Rand and Clearwater Paper

If you would invest  5,048  in Ingersoll Rand on September 1, 2022 and sell it today you would earn a total of  349.00  from holding Ingersoll Rand or generate 6.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

Ingersoll Rand  vs.  Clearwater Paper

 Performance (%) 
       Timeline  
Ingersoll Rand 
Ingersoll Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ingersoll Rand are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Ingersoll Rand may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Ingersoll Price Channel

Clearwater Paper 
Clearwater Performance
0 of 100
Over the last 90 days Clearwater Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Clearwater Paper is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ingersoll Rand and Clearwater Paper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ingersoll Rand and Clearwater Paper

The main advantage of trading using opposite Ingersoll Rand and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingersoll Rand position performs unexpectedly, Clearwater 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 Clearwater Paper will offset losses from the drop in Clearwater Paper's long position.
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The idea behind Ingersoll Rand and Clearwater 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Clearwater Paper as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Clearwater Paper's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Clearwater Paper's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Clearwater Paper.
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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