Correlation Between International Business and 83001AAC6

Can any of the company-specific risk be diversified away by investing in both International Business and 83001AAC6 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 83001AAC6 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 Six Flags Entertainment, you can compare the effects of market volatilities on International Business and 83001AAC6 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 83001AAC6. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and 83001AAC6.

Diversification Opportunities for International Business and 83001AAC6

-0.34

Correlation Coefficient

International Business  83001AAC6

Very good diversification

The 3 months correlation between International and 83001AAC6 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Six Flags Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Entertainment 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 83001AAC6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Entertainment has no effect on the direction of International Business i.e., International Business and 83001AAC6 go up and down completely randomly.

Pair Corralation between International Business and 83001AAC6

Considering the 90-day investment horizon International Business Machines is expected to generate 2.8 times more return on investment than 83001AAC6. However, International Business is 2.8 times more volatile than Six Flags Entertainment. It trades about 0.09 of its potential returns per unit of risk. Six Flags Entertainment is currently generating about 0.04 per unit of risk. If you would invest  12,970  in International Business Machines on September 19, 2024 and sell it today you would earn a total of  9,047  from holding International Business Machines or generate 69.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.68%
Values	Daily Returns

International Business Machine  vs.  Six Flags Entertainment

International Business

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Six Flags Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Six Flags Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 83001AAC6 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 83001AAC6

The main advantage of trading using opposite International Business and 83001AAC6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, 83001AAC6 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 83001AAC6 will offset losses from the drop in 83001AAC6's long position.

The idea behind International Business Machines and Six Flags Entertainment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.