Correlation Between International Consolidated and Mobile Tornado

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

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

Diversification Opportunities for International Consolidated and Mobile Tornado

0.64

Correlation Coefficient

International Consolidated  Mobile Tornado

Poor diversification

The 3 months correlation between International and Mobile is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Mobile Tornado Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobile Tornado Group and International Consolidated 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 Consolidated Airlines are associated (or correlated) with Mobile Tornado. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobile Tornado Group has no effect on the direction of International Consolidated i.e., International Consolidated and Mobile Tornado go up and down completely randomly.

Pair Corralation between International Consolidated and Mobile Tornado

Assuming the 90 days trading horizon International Consolidated Airlines is expected to generate 0.65 times more return on investment than Mobile Tornado. However, International Consolidated Airlines is 1.54 times less risky than Mobile Tornado. It trades about -0.02 of its potential returns per unit of risk. Mobile Tornado Group is currently generating about -0.04 per unit of risk. If you would invest  30,210  in International Consolidated Airlines on December 25, 2024 and sell it today you would lose (1,410) from holding International Consolidated Airlines or give up 4.67% of portfolio value over 90 days.

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

International Consolidated Air  vs.  Mobile Tornado Group

International Consolidated

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Consolidated Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, International Consolidated is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Mobile Tornado Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mobile Tornado Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with International Consolidated and Mobile Tornado

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

The idea behind International Consolidated Airlines and Mobile Tornado Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.