Correlation Between International Business and 512807AS7

Can any of the company-specific risk be diversified away by investing in both International Business and 512807AS7 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 512807AS7 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 LAM RESEARCH PORATION, you can compare the effects of market volatilities on International Business and 512807AS7 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 512807AS7. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and 512807AS7.

Diversification Opportunities for International Business and 512807AS7

0.18

Correlation Coefficient

International Business  512807AS7

Average diversification

The 3 months correlation between International and 512807AS7 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and LAM RESEARCH PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAM RESEARCH PORATION 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 512807AS7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAM RESEARCH PORATION has no effect on the direction of International Business i.e., International Business and 512807AS7 go up and down completely randomly.

Pair Corralation between International Business and 512807AS7

Considering the 90-day investment horizon International Business Machines is expected to generate 15.64 times more return on investment than 512807AS7. However, International Business is 15.64 times more volatile than LAM RESEARCH PORATION. It trades about 0.09 of its potential returns per unit of risk. LAM RESEARCH PORATION is currently generating about 0.01 per unit of risk. If you would invest  21,879  in International Business Machines on December 28, 2024 and sell it today you would earn a total of  2,521  from holding International Business Machines or generate 11.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

International Business Machine  vs.  LAM RESEARCH PORATION

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 displayed solid returns over the last few months and may actually be approaching a breakup point.

LAM RESEARCH PORATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days LAM RESEARCH PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 512807AS7 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Business and 512807AS7

The main advantage of trading using opposite International Business and 512807AS7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, 512807AS7 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 512807AS7 will offset losses from the drop in 512807AS7's long position.

The idea behind International Business Machines and LAM RESEARCH PORATION 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.