Correlation Between International Business and American Helium

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

Diversification Opportunities for International Business and American Helium

-0.42

Correlation Coefficient

International Business  American Helium

Very good diversification

The 3 months correlation between International and American is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and American Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Helium 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 American Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Helium has no effect on the direction of International Business i.e., International Business and American Helium go up and down completely randomly.

Pair Corralation between International Business and American Helium

Considering the 90-day investment horizon International Business is expected to generate 70.0 times less return on investment than American Helium. But when comparing it to its historical volatility, International Business Machines is 88.68 times less risky than American Helium. It trades about 0.14 of its potential returns per unit of risk. American Helium is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  16.00  in American Helium on September 4, 2024 and sell it today you would lose (5.00) from holding American Helium or give up 31.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

International Business Machine  vs.  American Helium

International Business

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Helium

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Helium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, American Helium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and American Helium

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

The idea behind International Business Machines and American Helium 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.