Correlation Between International Business and Axfood AB

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

Diversification Opportunities for International Business and Axfood AB

0.23

Correlation Coefficient

International Business  Axfood AB

Modest diversification

The 3 months correlation between International and Axfood is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB 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 Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of International Business i.e., International Business and Axfood AB go up and down completely randomly.

Pair Corralation between International Business and Axfood AB

Considering the 90-day investment horizon International Business Machines is expected to under-perform the Axfood AB. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.14 times less risky than Axfood AB. The stock trades about -0.12 of its potential returns per unit of risk. The Axfood AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,993  in Axfood AB on October 4, 2024 and sell it today you would earn a total of  67.00  from holding Axfood AB or generate 3.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.82%
Values	Daily Returns

International Business Machine  vs.  Axfood AB

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.

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with International Business and Axfood AB

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

The idea behind International Business Machines and Axfood AB 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.