Correlation Between International Business and Jefferies Financial

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

Diversification Opportunities for International Business and Jefferies Financial

-0.49

Correlation Coefficient

International Business  Jefferies Financial

Very good diversification

The 3 months correlation between International and Jefferies is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Jefferies Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jefferies Financial 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 Jefferies Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jefferies Financial has no effect on the direction of International Business i.e., International Business and Jefferies Financial go up and down completely randomly.

Pair Corralation between International Business and Jefferies Financial

Assuming the 90 days trading horizon International Business Machines is expected to generate 0.78 times more return on investment than Jefferies Financial. However, International Business Machines is 1.29 times less risky than Jefferies Financial. It trades about 0.06 of its potential returns per unit of risk. Jefferies Financial Group is currently generating about -0.25 per unit of risk. If you would invest  136,068  in International Business Machines on December 28, 2024 and sell it today you would earn a total of  8,932  from holding International Business Machines or generate 6.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

International Business Machine  vs.  Jefferies Financial Group

International Business

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Jefferies Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jefferies Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with International Business and Jefferies Financial

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

The idea behind International Business Machines and Jefferies Financial Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.