Correlation Between International Business and Computer
Can any of the company-specific risk be diversified away by investing in both International Business and Computer 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 International Business and Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Computer And Technologies, you can compare the effects of market volatilities on International Business and Computer 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 International Business with a short position of Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Computer.
Diversification Opportunities for International Business and Computer
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and Computer is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Computer And Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer And Technologies and International Business 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 International Business Machines are associated (or correlated) with Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer And Technologies has no effect on the direction of International Business i.e., International Business and Computer go up and down completely randomly.
Pair Corralation between International Business and Computer
Assuming the 90 days trading horizon International Business is expected to generate 1.71 times less return on investment than Computer. But when comparing it to its historical volatility, International Business Machines is 2.78 times less risky than Computer. It trades about 0.1 of its potential returns per unit of risk. Computer And Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8.64 in Computer And Technologies on August 27, 2024 and sell it today you would earn a total of 10.36 from holding Computer And Technologies or generate 119.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Computer And Technologies
Performance |
| Timeline |
| International Business |
| Computer And Technologies |
International Business and Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Computer
The main advantage of trading using opposite International Business and Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Computer 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 Computer will offset losses from the drop in Computer's long position.| International Business vs. Accenture plc | International Business vs. Cognizant Technology Solutions | International Business vs. Superior Plus Corp | International Business vs. NMI Holdings |
| Computer vs. Accenture plc | Computer vs. Cognizant Technology Solutions | Computer vs. Superior Plus Corp | Computer vs. NMI Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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