Correlation Between International Business and 882508BM5

Can any of the company-specific risk be diversified away by investing in both International Business and 882508BM5 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 882508BM5 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 TXN 27 15 SEP 51, you can compare the effects of market volatilities on International Business and 882508BM5 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 882508BM5. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and 882508BM5.

Diversification Opportunities for International Business and 882508BM5

0.72

Correlation Coefficient

International Business  882508BM5

Poor diversification

The 3 months correlation between International and 882508BM5 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and TXN 27 15 SEP 51 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TXN 27 15 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 882508BM5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TXN 27 15 has no effect on the direction of International Business i.e., International Business and 882508BM5 go up and down completely randomly.

Pair Corralation between International Business and 882508BM5

Considering the 90-day investment horizon International Business Machines is expected to generate 0.49 times more return on investment than 882508BM5. However, International Business Machines is 2.04 times less risky than 882508BM5. It trades about 0.15 of its potential returns per unit of risk. TXN 27 15 SEP 51 is currently generating about 0.01 per unit of risk. If you would invest  19,971  in International Business Machines on September 3, 2024 and sell it today you would earn a total of  2,770  from holding International Business Machines or generate 13.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	62.5%
Values	Daily Returns

International Business Machine  vs.  TXN 27 15 SEP 51

International Business

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

TXN 27 15

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TXN 27 15 SEP 51 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 882508BM5 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Business and 882508BM5

The main advantage of trading using opposite International Business and 882508BM5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, 882508BM5 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 882508BM5 will offset losses from the drop in 882508BM5's long position.

The idea behind International Business Machines and TXN 27 15 SEP 51 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.