Correlation Between International Business and SSE PLC
Can any of the company-specific risk be diversified away by investing in both International Business and SSE PLC 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 Business and SSE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and SSE PLC ADR, you can compare the effects of market volatilities on International Business and SSE PLC 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 Business with a short position of SSE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and SSE PLC.
Diversification Opportunities for International Business and SSE PLC
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and SSE is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and SSE PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSE PLC ADR and International Business 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 Business Machines are associated (or correlated) with SSE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSE PLC ADR has no effect on the direction of International Business i.e., International Business and SSE PLC go up and down completely randomly.
Pair Corralation between International Business and SSE PLC
Assuming the 90 days trading horizon International Business Machines is expected to generate 1.12 times more return on investment than SSE PLC. However, International Business is 1.12 times more volatile than SSE PLC ADR. It trades about 0.19 of its potential returns per unit of risk. SSE PLC ADR is currently generating about -0.24 per unit of risk. If you would invest 20,310 in International Business Machines on September 22, 2024 and sell it today you would earn a total of 1,290 from holding International Business Machines or generate 6.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
International Business Machine vs. SSE PLC ADR
Performance |
Timeline |
International Business |
SSE PLC ADR |
International Business and SSE PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with International Business and SSE PLC
The main advantage of trading using opposite International Business and SSE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, SSE PLC 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 SSE PLC will offset losses from the drop in SSE PLC's long position.International Business vs. Apple Inc | International Business vs. Apple Inc | International Business vs. Apple Inc | International Business vs. Apple Inc |
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 the Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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