Correlation Between International Business and Fidelity National

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

Diversification Opportunities for International Business and Fidelity National

0.34

Correlation Coefficient

International Business  Fidelity National

Weak diversification

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

Pair Corralation between International Business and Fidelity National

Assuming the 90 days trading horizon International Business Machines is expected to generate 1.36 times more return on investment than Fidelity National. However, International Business is 1.36 times more volatile than Fidelity National Information. It trades about 0.13 of its potential returns per unit of risk. Fidelity National Information is currently generating about 0.12 per unit of risk. If you would invest  120,242  in International Business Machines on September 25, 2024 and sell it today you would earn a total of  16,710  from holding International Business Machines or generate 13.9% return on investment over 90 days.

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

International Business Machine  vs.  Fidelity National Information

International Business

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, International Business sustained solid returns over the last few months and may actually be approaching a breakup point.

Fidelity National

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fidelity National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with International Business and Fidelity National

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

The idea behind International Business Machines and Fidelity National Information 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.