Correlation Between International Business and Ams AG

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

Diversification Opportunities for International Business and Ams AG

0.12

Correlation Coefficient

International Business  Ams AG

Average diversification

The 3 months correlation between International and Ams is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and ams AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ams AG 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 Ams AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ams AG has no effect on the direction of International Business i.e., International Business and Ams AG go up and down completely randomly.

Pair Corralation between International Business and Ams AG

Considering the 90-day investment horizon International Business is expected to generate 642.13 times less return on investment than Ams AG. But when comparing it to its historical volatility, International Business Machines is 201.39 times less risky than Ams AG. It trades about 0.08 of its potential returns per unit of risk. ams AG is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  4,652  in ams AG on October 4, 2024 and sell it today you would lose (4,301) from holding ams AG or give up 92.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

International Business Machine  vs.  ams AG

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.

ams AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ams AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with International Business and Ams AG

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

The idea behind International Business Machines and ams AG 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.