Correlation Between International Business and Zepp Health

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

Diversification Opportunities for International Business and Zepp Health

0.02

Correlation Coefficient

International Business  Zepp Health

Significant diversification

The 3 months correlation between International and Zepp is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Zepp Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zepp Health Corp 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 Zepp Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zepp Health Corp has no effect on the direction of International Business i.e., International Business and Zepp Health go up and down completely randomly.

Pair Corralation between International Business and Zepp Health

Considering the 90-day investment horizon International Business Machines is expected to generate 0.49 times more return on investment than Zepp Health. However, International Business Machines is 2.04 times less risky than Zepp Health. It trades about -0.1 of its potential returns per unit of risk. Zepp Health Corp is currently generating about -0.11 per unit of risk. If you would invest  25,900  in International Business Machines on December 3, 2024 and sell it today you would lose (656.00) from holding International Business Machines or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

International Business Machine  vs.  Zepp Health Corp

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 weak fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Zepp Health Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with International Business and Zepp Health

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

The idea behind International Business Machines and Zepp Health Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.