Correlation Between International Business and DOLFINES

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

Diversification Opportunities for International Business and DOLFINES

0.62

Correlation Coefficient

International Business  DOLFINES

Poor diversification

The 3 months correlation between International and DOLFINES is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and DOLFINES SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLFINES SA EO 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 DOLFINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLFINES SA EO has no effect on the direction of International Business i.e., International Business and DOLFINES go up and down completely randomly.

Pair Corralation between International Business and DOLFINES

Considering the 90-day investment horizon International Business Machines is expected to under-perform the DOLFINES. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 36.54 times less risky than DOLFINES. The stock trades about -0.02 of its potential returns per unit of risk. The DOLFINES SA EO is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  50.00  in DOLFINES SA EO on October 21, 2024 and sell it today you would earn a total of  123.00  from holding DOLFINES SA EO or generate 246.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.87%
Values	Daily Returns

International Business Machine  vs.  DOLFINES SA EO

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 current stock price disarray, may contribute to short-term losses for the investors.

DOLFINES SA EO

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days DOLFINES SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, DOLFINES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and DOLFINES

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

The idea behind International Business Machines and DOLFINES SA EO 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.