Correlation Between International Business and Moonpig Group

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

Diversification Opportunities for International Business and Moonpig Group

-0.12

Correlation Coefficient

International Business  Moonpig Group

Good diversification

The 3 months correlation between International and Moonpig is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Moonpig Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moonpig Group PLC 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 Moonpig Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moonpig Group PLC has no effect on the direction of International Business i.e., International Business and Moonpig Group go up and down completely randomly.

Pair Corralation between International Business and Moonpig Group

Considering the 90-day investment horizon International Business Machines is expected to under-perform the Moonpig Group. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.87 times less risky than Moonpig Group. The stock trades about -0.02 of its potential returns per unit of risk. The Moonpig Group PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  21,800  in Moonpig Group PLC on October 5, 2024 and sell it today you would lose (750.00) from holding Moonpig Group PLC or give up 3.44% of portfolio value over 90 days.

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

International Business Machine  vs.  Moonpig Group PLC

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.

Moonpig Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moonpig Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Moonpig Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with International Business and Moonpig Group

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

The idea behind International Business Machines and Moonpig Group PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.