Correlation Between Intel and Pacific Basin

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

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

Diversification Opportunities for Intel and Pacific Basin

0.84

Correlation Coefficient

Intel  Pacific Basin

Very poor diversification

The 3 months correlation between Intel and Pacific is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Pacific Basin Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Basin Shipping 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 Pacific Basin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Basin Shipping has no effect on the direction of Intel i.e., Intel and Pacific Basin go up and down completely randomly.

Pair Corralation between Intel and Pacific Basin

Given the investment horizon of 90 days Intel is expected to under-perform the Pacific Basin. But the stock apears to be less risky and, when comparing its historical volatility, Intel is 1.84 times less risky than Pacific Basin. The stock trades about -0.01 of its potential returns per unit of risk. The Pacific Basin Shipping is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Pacific Basin Shipping on October 11, 2024 and sell it today you would lose (14.00) from holding Pacific Basin Shipping or give up 41.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	65.45%
Values	Daily Returns

Intel  vs.  Pacific Basin Shipping

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pacific Basin Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Basin Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Intel and Pacific Basin

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

The idea behind Intel and Pacific Basin Shipping 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.