Correlation Between International Business and 18977W2B5

Can any of the company-specific risk be diversified away by investing in both International Business and 18977W2B5 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 18977W2B5 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 CNO 165 06 JAN 25, you can compare the effects of market volatilities on International Business and 18977W2B5 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 18977W2B5. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and 18977W2B5.

Diversification Opportunities for International Business and 18977W2B5

0.03

Correlation Coefficient

International Business  18977W2B5

Significant diversification

The 3 months correlation between International and 18977W2B5 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and CNO 165 06 JAN 25 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNO 165 06 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 18977W2B5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNO 165 06 has no effect on the direction of International Business i.e., International Business and 18977W2B5 go up and down completely randomly.

Pair Corralation between International Business and 18977W2B5

Considering the 90-day investment horizon International Business Machines is expected to under-perform the 18977W2B5. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.52 times less risky than 18977W2B5. The stock trades about -0.18 of its potential returns per unit of risk. The CNO 165 06 JAN 25 is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  9,959  in CNO 165 06 JAN 25 on October 6, 2024 and sell it today you would lose (143.00) from holding CNO 165 06 JAN 25 or give up 1.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.0%
Values	Daily Returns

International Business Machine  vs.  CNO 165 06 JAN 25

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.

CNO 165 06

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNO 165 06 JAN 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 18977W2B5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Business and 18977W2B5

The main advantage of trading using opposite International Business and 18977W2B5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, 18977W2B5 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 18977W2B5 will offset losses from the drop in 18977W2B5's long position.

The idea behind International Business Machines and CNO 165 06 JAN 25 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.