Correlation Between International Consolidated and Thyssenkrupp

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

Diversification Opportunities for International Consolidated and Thyssenkrupp

0.87

Correlation Coefficient

International Consolidated  Thyssenkrupp

Very poor diversification

The 3 months correlation between International and Thyssenkrupp is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG 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 Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of International Consolidated i.e., International Consolidated and Thyssenkrupp go up and down completely randomly.

Pair Corralation between International Consolidated and Thyssenkrupp

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 0.55 times more return on investment than Thyssenkrupp. However, International Consolidated Airlines is 1.82 times less risky than Thyssenkrupp. It trades about 0.43 of its potential returns per unit of risk. thyssenkrupp AG is currently generating about 0.12 per unit of risk. If you would invest  256.00  in International Consolidated Airlines on September 27, 2024 and sell it today you would earn a total of  114.00  from holding International Consolidated Airlines or generate 44.53% return on investment over 90 days.

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

International Consolidated Air  vs.  thyssenkrupp AG

International Consolidated

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

thyssenkrupp AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Thyssenkrupp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Consolidated and Thyssenkrupp

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

The idea behind International Consolidated Airlines and thyssenkrupp AG 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.