Correlation Between International Consolidated and WuXi AppTec
Can any of the company-specific risk be diversified away by investing in both International Consolidated and WuXi AppTec 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 WuXi AppTec 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 WuXi AppTec Co, you can compare the effects of market volatilities on International Consolidated and WuXi AppTec 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 WuXi AppTec. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and WuXi AppTec.
Diversification Opportunities for International Consolidated and WuXi AppTec
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between International and WuXi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and WuXi AppTec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi AppTec 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 WuXi AppTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi AppTec has no effect on the direction of International Consolidated i.e., International Consolidated and WuXi AppTec go up and down completely randomly.
Pair Corralation between International Consolidated and WuXi AppTec
Assuming the 90 days horizon International Consolidated Airlines is expected to generate 0.62 times more return on investment than WuXi AppTec. However, International Consolidated Airlines is 1.62 times less risky than WuXi AppTec. It trades about 0.25 of its potential returns per unit of risk. WuXi AppTec Co is currently generating about -0.2 per unit of risk. If you would invest 342.00 in International Consolidated Airlines on October 11, 2024 and sell it today you would earn a total of 27.00 from holding International Consolidated Airlines or generate 7.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
International Consolidated Air vs. WuXi AppTec Co
Performance |
Timeline |
International Consolidated |
WuXi AppTec |
International Consolidated and WuXi AppTec Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with International Consolidated and WuXi AppTec
The main advantage of trading using opposite International Consolidated and WuXi AppTec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated position performs unexpectedly, WuXi AppTec 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 WuXi AppTec will offset losses from the drop in WuXi AppTec's long position.The idea behind International Consolidated Airlines and WuXi AppTec Co 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.
WuXi AppTec vs. International Consolidated Airlines | WuXi AppTec vs. Delta Electronics Public | WuXi AppTec vs. American Airlines Group | WuXi AppTec vs. Nucletron Electronic Aktiengesellschaft |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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