Correlation Between International Business and Mitsui Mining

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

Diversification Opportunities for International Business and Mitsui Mining

0.4

Correlation Coefficient

International Business  Mitsui Mining

Very weak diversification

The 3 months correlation between International and Mitsui is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Mitsui Mining Smelting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Mining Smelting 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 Mitsui Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Mining Smelting has no effect on the direction of International Business i.e., International Business and Mitsui Mining go up and down completely randomly.

Pair Corralation between International Business and Mitsui Mining

Considering the 90-day investment horizon International Business Machines is expected to generate 0.97 times more return on investment than Mitsui Mining. However, International Business Machines is 1.03 times less risky than Mitsui Mining. It trades about -0.01 of its potential returns per unit of risk. Mitsui Mining Smelting is currently generating about -0.06 per unit of risk. If you would invest  22,535  in International Business Machines on October 6, 2024 and sell it today you would lose (270.00) from holding International Business Machines or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

International Business Machine  vs.  Mitsui Mining Smelting

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.

Mitsui Mining Smelting

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with International Business and Mitsui Mining

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

The idea behind International Business Machines and Mitsui Mining Smelting 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.