Correlation Between International Business and Arconic

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

Diversification Opportunities for International Business and Arconic

0.25

Correlation Coefficient

International Business  Arconic

Modest diversification

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

Pair Corralation between International Business and Arconic

If you would invest  22,489  in International Business Machines on October 27, 2024 and sell it today you would lose (9.00) from holding International Business Machines or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.26%
Values	Daily Returns

International Business Machine  vs.  Arconic

International Business

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Arconic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arconic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arconic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with International Business and Arconic

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

The idea behind International Business Machines and Arconic 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.