Correlation Between International Business and Affirm Holdings

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

Diversification Opportunities for International Business and Affirm Holdings

0.25

Correlation Coefficient

International Business  Affirm Holdings

Modest diversification

The 3 months correlation between International and Affirm is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Affirm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affirm Holdings 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 Affirm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affirm Holdings has no effect on the direction of International Business i.e., International Business and Affirm Holdings go up and down completely randomly.

Pair Corralation between International Business and Affirm Holdings

Considering the 90-day investment horizon International Business is expected to generate 4.79 times less return on investment than Affirm Holdings. But when comparing it to its historical volatility, International Business Machines is 3.51 times less risky than Affirm Holdings. It trades about 0.15 of its potential returns per unit of risk. Affirm Holdings is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,964  in Affirm Holdings on September 5, 2024 and sell it today you would earn a total of  3,112  from holding Affirm Holdings or generate 78.51% return on investment over 90 days.

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

International Business Machine  vs.  Affirm Holdings

International Business

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

Affirm Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Affirm Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Affirm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and Affirm Holdings

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

The idea behind International Business Machines and Affirm Holdings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.