Correlation Between International Business and Crayon Group

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

Diversification Opportunities for International Business and Crayon Group

0.26

Correlation Coefficient

International Business  Crayon Group

Modest diversification

The 3 months correlation between International and Crayon is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Crayon Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crayon Group Holding 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 Crayon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crayon Group Holding has no effect on the direction of International Business i.e., International Business and Crayon Group go up and down completely randomly.

Pair Corralation between International Business and Crayon Group

Considering the 90-day investment horizon International Business Machines is expected to under-perform the Crayon Group. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.99 times less risky than Crayon Group. The stock trades about -0.06 of its potential returns per unit of risk. The Crayon Group Holding is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  985.00  in Crayon Group Holding on September 29, 2024 and sell it today you would earn a total of  140.00  from holding Crayon Group Holding or generate 14.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

International Business Machine  vs.  Crayon Group Holding

International Business

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Crayon Group Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crayon Group Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Crayon Group is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Business and Crayon Group

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

The idea behind International Business Machines and Crayon Group Holding 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 Transaction History module to view history of all your transactions and understand their impact on performance.