Correlation Between International Business and Columbia

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

Diversification Opportunities for International Business and Columbia

0.0

Correlation Coefficient

International Business  Columbia

Pay attention - limited upside

The 3 months correlation between International and Columbia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Columbia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia 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 Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia has no effect on the direction of International Business i.e., International Business and Columbia go up and down completely randomly.

Pair Corralation between International Business and Columbia

If you would invest  13,478  in International Business Machines on October 6, 2024 and sell it today you would earn a total of  8,787  from holding International Business Machines or generate 65.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

International Business Machine  vs.  Columbia

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.

Columbia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with International Business and Columbia

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

The idea behind International Business Machines and Columbia 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.