Correlation Between Hexcel and International Business

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

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

Diversification Opportunities for Hexcel and International Business

0.72

Correlation Coefficient

Hexcel  International Business

Poor diversification

The 3 months correlation between Hexcel and International is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Hexcel 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 Hexcel are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Hexcel i.e., Hexcel and International Business go up and down completely randomly.

Pair Corralation between Hexcel and International Business

Assuming the 90 days horizon Hexcel is expected to generate 1.24 times more return on investment than International Business. However, Hexcel is 1.24 times more volatile than International Business Machines. It trades about 0.09 of its potential returns per unit of risk. International Business Machines is currently generating about 0.07 per unit of risk. If you would invest  5,800  in Hexcel on September 23, 2024 and sell it today you would earn a total of  150.00  from holding Hexcel or generate 2.59% return on investment over 90 days.

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

Hexcel  vs.  International Business Machine

Hexcel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hexcel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

International Business

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hexcel and International Business

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

The idea behind Hexcel and International Business Machines 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.