Correlation Between International Consolidated and Medtronic PLC

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

Diversification Opportunities for International Consolidated and Medtronic PLC

0.58

Correlation Coefficient

International Consolidated  Medtronic PLC

Very weak diversification

The 3 months correlation between International and Medtronic is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC 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 Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of International Consolidated i.e., International Consolidated and Medtronic PLC go up and down completely randomly.

Pair Corralation between International Consolidated and Medtronic PLC

Assuming the 90 days horizon International Consolidated Airlines is expected to under-perform the Medtronic PLC. In addition to that, International Consolidated is 1.68 times more volatile than Medtronic PLC. It trades about -0.03 of its total potential returns per unit of risk. Medtronic PLC is currently generating about 0.07 per unit of volatility. If you would invest  7,736  in Medtronic PLC on December 25, 2024 and sell it today you would earn a total of  464.00  from holding Medtronic PLC or generate 6.0% return on investment over 90 days.

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

International Consolidated Air  vs.  Medtronic PLC

International Consolidated

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Consolidated Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, International Consolidated is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Medtronic PLC

Risk-Adjusted Performance

Modest

Over the last 90 days Medtronic PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Medtronic PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with International Consolidated and Medtronic PLC

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

The idea behind International Consolidated Airlines and Medtronic PLC 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.