Correlation Between International Consolidated and Joint Stock

Can any of the company-specific risk be diversified away by investing in both International Consolidated and Joint Stock 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 Consolidated and Joint Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between International Consolidated Airlines and Joint Stock, you can compare the effects of market volatilities on International Consolidated and Joint Stock 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 Consolidated with a short position of Joint Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Joint Stock.

Diversification Opportunities for International Consolidated and Joint Stock

-0.46

Correlation Coefficient

International Consolidated  Joint Stock

Very good diversification

The 3 months correlation between International and Joint is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock and International Consolidated 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 Consolidated Airlines are associated (or correlated) with Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of International Consolidated i.e., International Consolidated and Joint Stock go up and down completely randomly.

Pair Corralation between International Consolidated and Joint Stock

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 0.65 times more return on investment than Joint Stock. However, International Consolidated Airlines is 1.53 times less risky than Joint Stock. It trades about 0.42 of its potential returns per unit of risk. Joint Stock is currently generating about -0.01 per unit of risk. If you would invest  508.00  in International Consolidated Airlines on October 8, 2024 and sell it today you would earn a total of  241.00  from holding International Consolidated Airlines or generate 47.44% return on investment over 90 days.

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

International Consolidated Air  vs.  Joint Stock

International Consolidated

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, International Consolidated showed solid returns over the last few months and may actually be approaching a breakup point.

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Joint Stock is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with International Consolidated and Joint Stock

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

The idea behind International Consolidated Airlines and Joint Stock 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.