Correlation Between International Business and Dye Durham

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

Diversification Opportunities for International Business and Dye Durham

0.1

Correlation Coefficient

International Business  Dye Durham

Average diversification

The 3 months correlation between International and Dye is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Dye Durham in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dye Durham 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 Dye Durham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dye Durham has no effect on the direction of International Business i.e., International Business and Dye Durham go up and down completely randomly.

Pair Corralation between International Business and Dye Durham

Assuming the 90 days trading horizon International Business Machines is expected to generate 0.39 times more return on investment than Dye Durham. However, International Business Machines is 2.56 times less risky than Dye Durham. It trades about 0.08 of its potential returns per unit of risk. Dye Durham is currently generating about 0.02 per unit of risk. If you would invest  2,084  in International Business Machines on September 28, 2024 and sell it today you would earn a total of  1,345  from holding International Business Machines or generate 64.54% return on investment over 90 days.

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

International Business Machine  vs.  Dye Durham

International Business

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dye Durham

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dye Durham are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Dye Durham displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and Dye Durham

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

The idea behind International Business Machines and Dye Durham 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.