Correlation Between International Business and Nouveau Life

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

Diversification Opportunities for International Business and Nouveau Life

-0.36

Correlation Coefficient

International Business  Nouveau Life

Very good diversification

The 3 months correlation between International and Nouveau is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Nouveau Life Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nouveau Life Pharmac 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 Nouveau Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nouveau Life Pharmac has no effect on the direction of International Business i.e., International Business and Nouveau Life go up and down completely randomly.

Pair Corralation between International Business and Nouveau Life

Considering the 90-day investment horizon International Business is expected to generate 27.95 times less return on investment than Nouveau Life. But when comparing it to its historical volatility, International Business Machines is 16.89 times less risky than Nouveau Life. It trades about 0.09 of its potential returns per unit of risk. Nouveau Life Pharmaceuticals is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Nouveau Life Pharmaceuticals on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Nouveau Life Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

International Business Machine  vs.  Nouveau Life Pharmaceuticals

International Business

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nouveau Life Pharmac

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nouveau Life Pharmaceuticals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nouveau Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and Nouveau Life

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

The idea behind International Business Machines and Nouveau Life Pharmaceuticals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.