Correlation Between International Business and TVA

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

Diversification Opportunities for International Business and TVA

-0.4

Correlation Coefficient

International Business  TVA

Very good diversification

The 3 months correlation between International and TVA is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and TVA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVA Group 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 TVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVA Group has no effect on the direction of International Business i.e., International Business and TVA go up and down completely randomly.

Pair Corralation between International Business and TVA

Assuming the 90 days trading horizon International Business Machines is expected to generate 0.32 times more return on investment than TVA. However, International Business Machines is 3.09 times less risky than TVA. It trades about 0.11 of its potential returns per unit of risk. TVA Group is currently generating about -0.03 per unit of risk. If you would invest  1,806  in International Business Machines on December 3, 2024 and sell it today you would earn a total of  2,044  from holding International Business Machines or generate 113.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.06%
Values	Daily Returns

International Business Machine  vs.  TVA Group

International Business

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TVA Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TVA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, TVA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with International Business and TVA

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

The idea behind International Business Machines and TVA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.