Correlation Between International Business and Highland Surprise

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

Diversification Opportunities for International Business and Highland Surprise

0.0

Correlation Coefficient

International Business  Highland Surprise

Pay attention - limited upside

The 3 months correlation between International and Highland is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Highland Surprise Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Surprise 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 Highland Surprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Surprise has no effect on the direction of International Business i.e., International Business and Highland Surprise go up and down completely randomly.

Pair Corralation between International Business and Highland Surprise

Considering the 90-day investment horizon International Business Machines is expected to generate 0.54 times more return on investment than Highland Surprise. However, International Business Machines is 1.85 times less risky than Highland Surprise. It trades about 0.12 of its potential returns per unit of risk. Highland Surprise Consolidated is currently generating about 0.05 per unit of risk. If you would invest  11,474  in International Business Machines on October 5, 2024 and sell it today you would earn a total of  10,520  from holding International Business Machines or generate 91.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

International Business Machine  vs.  Highland Surprise Consolidated

International Business

Risk-Adjusted Performance

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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.

Highland Surprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Surprise Consolidated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Highland Surprise is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with International Business and Highland Surprise

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

The idea behind International Business Machines and Highland Surprise Consolidated 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 Global Correlations module to find global opportunities by holding instruments from different markets.