Correlation Between Intel and American Business

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

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

Diversification Opportunities for Intel and American Business

0.78

Correlation Coefficient

Intel  American Business

Poor diversification

The 3 months correlation between Intel and American is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Intel and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business 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 American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of Intel i.e., Intel and American Business go up and down completely randomly.

Pair Corralation between Intel and American Business

Given the investment horizon of 90 days Intel is expected to generate 1.05 times less return on investment than American Business. In addition to that, Intel is 2.68 times more volatile than American Business Bk. It trades about 0.11 of its total potential returns per unit of risk. American Business Bk is currently generating about 0.32 per unit of volatility. If you would invest  3,650  in American Business Bk on September 3, 2024 and sell it today you would earn a total of  825.00  from holding American Business Bk or generate 22.6% return on investment over 90 days.

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

Intel  vs.  American Business Bk

Intel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Intel exhibited solid returns over the last few months and may actually be approaching a breakup point.

American Business

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Business Bk are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, American Business showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intel and American Business

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

The idea behind Intel and American Business Bk 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.