Correlation Between International Business and Ares Acquisition

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

Diversification Opportunities for International Business and Ares Acquisition

0.19

Correlation Coefficient

International Business  Ares Acquisition

Average diversification

The 3 months correlation between International and Ares is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition 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 Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of International Business i.e., International Business and Ares Acquisition go up and down completely randomly.

Pair Corralation between International Business and Ares Acquisition

Considering the 90-day investment horizon International Business is expected to generate 19.7 times less return on investment than Ares Acquisition. But when comparing it to its historical volatility, International Business Machines is 40.18 times less risky than Ares Acquisition. It trades about 0.1 of its potential returns per unit of risk. Ares Acquisition is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Ares Acquisition on October 21, 2024 and sell it today you would earn a total of  1,099  from holding Ares Acquisition or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.25%
Values	Daily Returns

International Business Machine  vs.  Ares Acquisition

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 current stock price disarray, may contribute to short-term losses for the investors.

Ares Acquisition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ares Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with International Business and Ares Acquisition

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

The idea behind International Business Machines and Ares Acquisition 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.