Correlation Between American Public and International Business
Can any of the company-specific risk be diversified away by investing in both American Public 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 American Public and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Public Education and International Business Machines, you can compare the effects of market volatilities on American Public 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 American Public with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and International Business.
Diversification Opportunities for American Public and International Business
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and International is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and American Public 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 American Public Education 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 American Public i.e., American Public and International Business go up and down completely randomly.
Pair Corralation between American Public and International Business
Assuming the 90 days horizon American Public Education is expected to generate 3.58 times more return on investment than International Business. However, American Public is 3.58 times more volatile than International Business Machines. It trades about 0.05 of its potential returns per unit of risk. International Business Machines is currently generating about 0.1 per unit of risk. If you would invest 1,200 in American Public Education on October 26, 2024 and sell it today you would earn a total of 860.00 from holding American Public Education or generate 71.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
American Public Education vs. International Business Machine
Performance |
| Timeline |
| American Public Education |
| International Business |
American Public and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Public and International Business
The main advantage of trading using opposite American Public and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public 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.| American Public vs. Nomad Foods | American Public vs. Tyson Foods | American Public vs. CAL MAINE FOODS | American Public vs. Urban Outfitters |
| International Business vs. Apollo Medical Holdings | International Business vs. CDN IMPERIAL BANK | International Business vs. MEDICAL FACILITIES NEW | International Business vs. CVW CLEANTECH INC |
Check out your portfolio center.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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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