Correlation Between One World and International Consolidated

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

By analyzing existing cross correlation between One World Universe and International Consolidated Airlines, you can compare the effects of market volatilities on One World and International Consolidated 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 One World with a short position of International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of One World and International Consolidated.

Diversification Opportunities for One World and International Consolidated

0.18

Correlation Coefficient

One World  International Consolidated

Average diversification

The 3 months correlation between One and International is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding One World Universe and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated and One World 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 One World Universe are associated (or correlated) with International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of One World i.e., One World and International Consolidated go up and down completely randomly.

Pair Corralation between One World and International Consolidated

Given the investment horizon of 90 days One World Universe is expected to generate 3.73 times more return on investment than International Consolidated. However, One World is 3.73 times more volatile than International Consolidated Airlines. It trades about 0.03 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about -0.03 per unit of risk. If you would invest  0.74  in One World Universe on December 30, 2024 and sell it today you would lose (0.06) from holding One World Universe or give up 8.11% of portfolio value over 90 days.

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

One World Universe  vs.  International Consolidated Air

One World Universe

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in One World Universe are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, One World showed solid returns over the last few months and may actually be approaching a breakup point.

International Consolidated

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Consolidated Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, International Consolidated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with One World and International Consolidated

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

The idea behind One World Universe and International Consolidated Airlines 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.