Correlation Between International Consolidated and Distribuidora Internacional

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

Diversification Opportunities for International Consolidated and Distribuidora Internacional

0.84

Correlation Coefficient

International Consolidated  Distribuidora Internacional

Very poor diversification

The 3 months correlation between International and Distribuidora is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Distribuidora Internacional de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distribuidora Internacional 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 Distribuidora Internacional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distribuidora Internacional has no effect on the direction of International Consolidated i.e., International Consolidated and Distribuidora Internacional go up and down completely randomly.

Pair Corralation between International Consolidated and Distribuidora Internacional

Assuming the 90 days trading horizon International Consolidated Airlines is expected to generate 1.0 times more return on investment than Distribuidora Internacional. However, International Consolidated Airlines is 1.0 times less risky than Distribuidora Internacional. It trades about 0.22 of its potential returns per unit of risk. Distribuidora Internacional de is currently generating about 0.1 per unit of risk. If you would invest  186.00  in International Consolidated Airlines on October 12, 2024 and sell it today you would earn a total of  187.00  from holding International Consolidated Airlines or generate 100.54% return on investment over 90 days.

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

International Consolidated Air  vs.  Distribuidora Internacional de

International Consolidated

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Distribuidora Internacional

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Distribuidora Internacional de are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Distribuidora Internacional exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Consolidated and Distribuidora Internacional

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

The idea behind International Consolidated Airlines and Distribuidora Internacional de 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.