Correlation Between UPS CDR and International Business

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

By analyzing existing cross correlation between UPS CDR and International Business Machines, you can compare the effects of market volatilities on UPS CDR and International 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 UPS CDR with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPS CDR and International Business.

Diversification Opportunities for UPS CDR and International Business

-0.14

Correlation Coefficient

UPS CDR  International Business

Good diversification

The 3 months correlation between UPS and International is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding UPS CDR and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and UPS CDR 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 UPS CDR are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of UPS CDR i.e., UPS CDR and International Business go up and down completely randomly.

Pair Corralation between UPS CDR and International Business

Assuming the 90 days trading horizon UPS CDR is expected to under-perform the International Business. In addition to that, UPS CDR is 1.09 times more volatile than International Business Machines. It trades about -0.17 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.33 per unit of volatility. If you would invest  3,200  in International Business Machines on September 18, 2024 and sell it today you would earn a total of  318.00  from holding International Business Machines or generate 9.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

UPS CDR  vs.  International Business Machine

UPS CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UPS CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, UPS CDR is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

International Business

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UPS CDR and International Business

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

The idea behind UPS CDR and International Business Machines 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..