Correlation Between International Business and Rocket Internet

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

Diversification Opportunities for International Business and Rocket Internet

0.05

Correlation Coefficient

International Business  Rocket Internet

Significant diversification

The 3 months correlation between International and Rocket is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Rocket Internet SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Internet SE 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 Rocket Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Internet SE has no effect on the direction of International Business i.e., International Business and Rocket Internet go up and down completely randomly.

Pair Corralation between International Business and Rocket Internet

Considering the 90-day investment horizon International Business Machines is expected to generate 0.91 times more return on investment than Rocket Internet. However, International Business Machines is 1.1 times less risky than Rocket Internet. It trades about 0.14 of its potential returns per unit of risk. Rocket Internet SE is currently generating about 0.09 per unit of risk. If you would invest  20,595  in International Business Machines on October 6, 2024 and sell it today you would earn a total of  1,670  from holding International Business Machines or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

International Business Machine  vs.  Rocket Internet SE

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.

Rocket Internet SE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Rocket Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with International Business and Rocket Internet

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

The idea behind International Business Machines and Rocket Internet SE 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.