Correlation Between International Consolidated and Blue Water

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

By analyzing existing cross correlation between International Consolidated Companies and Blue Water Ventures, you can compare the effects of market volatilities on International Consolidated and Blue Water 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 Blue Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Blue Water.

Diversification Opportunities for International Consolidated and Blue Water

0.55

Correlation Coefficient

International Consolidated  Blue Water

Very weak diversification

The 3 months correlation between International and Blue is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Com and Blue Water Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Water Ventures 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 Companies are associated (or correlated) with Blue Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Water Ventures has no effect on the direction of International Consolidated i.e., International Consolidated and Blue Water go up and down completely randomly.

Pair Corralation between International Consolidated and Blue Water

Given the investment horizon of 90 days International Consolidated Companies is expected to generate 21.11 times more return on investment than Blue Water. However, International Consolidated is 21.11 times more volatile than Blue Water Ventures. It trades about 0.24 of its potential returns per unit of risk. Blue Water Ventures is currently generating about -0.18 per unit of risk. If you would invest  40.00  in International Consolidated Companies on September 5, 2024 and sell it today you would lose (38.99) from holding International Consolidated Companies or give up 97.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

International Consolidated Com  vs.  Blue Water Ventures

International Consolidated

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Companies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blue Water Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Water Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with International Consolidated and Blue Water

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

The idea behind International Consolidated Companies and Blue Water Ventures 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.