Correlation Between Intel and All American

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

By analyzing existing cross correlation between Intel and All American Gld, you can compare the effects of market volatilities on Intel and All American 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 Intel with a short position of All American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and All American.

Diversification Opportunities for Intel and All American

-0.28

Correlation Coefficient

Intel  All American

Very good diversification

The 3 months correlation between Intel and All is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Intel and All American Gld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All American Gld and Intel 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 Intel are associated (or correlated) with All American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All American Gld has no effect on the direction of Intel i.e., Intel and All American go up and down completely randomly.

Pair Corralation between Intel and All American

Given the investment horizon of 90 days Intel is expected to generate 0.42 times more return on investment than All American. However, Intel is 2.41 times less risky than All American. It trades about 0.08 of its potential returns per unit of risk. All American Gld is currently generating about -0.01 per unit of risk. If you would invest  2,030  in Intel on December 27, 2024 and sell it today you would earn a total of  312.00  from holding Intel or generate 15.37% return on investment over 90 days.

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

Intel  vs.  All American Gld

Intel

Risk-Adjusted Performance

Modest

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

All American Gld

Risk-Adjusted Performance

Weak

Over the last 90 days All American Gld has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, All American is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Intel and All American

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

The idea behind Intel and All American Gld 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.