Correlation Between International Business and Reliq Health

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

Diversification Opportunities for International Business and Reliq Health

0.62

Correlation Coefficient

International Business  Reliq Health

Poor diversification

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

Pair Corralation between International Business and Reliq Health

Considering the 90-day investment horizon International Business is expected to generate 123.91 times less return on investment than Reliq Health. But when comparing it to its historical volatility, International Business Machines is 70.7 times less risky than Reliq Health. It trades about 0.09 of its potential returns per unit of risk. Reliq Health Technologies is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.12  in Reliq Health Technologies on December 30, 2024 and sell it today you would lose (0.11) from holding Reliq Health Technologies or give up 91.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

International Business Machine  vs.  Reliq Health Technologies

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.

Reliq Health Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reliq Health Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reliq Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and Reliq Health

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

The idea behind International Business Machines and Reliq Health Technologies 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.