Correlation Between International Business and ELEMENT FLEET

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

Diversification Opportunities for International Business and ELEMENT FLEET

0.37

Correlation Coefficient

International Business  ELEMENT FLEET

Weak diversification

The 3 months correlation between International and ELEMENT is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and ELEMENT FLEET MGMT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELEMENT FLEET MGMT 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 ELEMENT FLEET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELEMENT FLEET MGMT has no effect on the direction of International Business i.e., International Business and ELEMENT FLEET go up and down completely randomly.

Pair Corralation between International Business and ELEMENT FLEET

Considering the 90-day investment horizon International Business Machines is expected to under-perform the ELEMENT FLEET. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.42 times less risky than ELEMENT FLEET. The stock trades about -0.02 of its potential returns per unit of risk. The ELEMENT FLEET MGMT is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,867  in ELEMENT FLEET MGMT on October 5, 2024 and sell it today you would earn a total of  23.00  from holding ELEMENT FLEET MGMT or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

International Business Machine  vs.  ELEMENT FLEET MGMT

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ELEMENT FLEET MGMT

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ELEMENT FLEET MGMT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ELEMENT FLEET is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Business and ELEMENT FLEET

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

The idea behind International Business Machines and ELEMENT FLEET MGMT 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.