Correlation Between International Business and DANAHER

Can any of the company-specific risk be diversified away by investing in both International Business and DANAHER 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 DANAHER 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 DANAHER P 4375, you can compare the effects of market volatilities on International Business and DANAHER 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 DANAHER. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and DANAHER.

Diversification Opportunities for International Business and DANAHER

-0.43

Correlation Coefficient

International Business  DANAHER

Very good diversification

The 3 months correlation between International and DANAHER is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and DANAHER P 4375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DANAHER P 4375 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 DANAHER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DANAHER P 4375 has no effect on the direction of International Business i.e., International Business and DANAHER go up and down completely randomly.

Pair Corralation between International Business and DANAHER

Considering the 90-day investment horizon International Business Machines is expected to under-perform the DANAHER. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.4 times less risky than DANAHER. The stock trades about -0.01 of its potential returns per unit of risk. The DANAHER P 4375 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,084  in DANAHER P 4375 on October 8, 2024 and sell it today you would earn a total of  290.00  from holding DANAHER P 4375 or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	47.62%
Values	Daily Returns

International Business Machine  vs.  DANAHER P 4375

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.

DANAHER P 4375

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DANAHER P 4375 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, DANAHER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with International Business and DANAHER

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

The idea behind International Business Machines and DANAHER P 4375 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.