Correlation Between International Business and T Rex

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Can any of the company-specific risk be diversified away by investing in both International Business and T Rex 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 T Rex 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 T Rex 2X Inverse, you can compare the effects of market volatilities on International Business and T Rex 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 T Rex. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and T Rex.

Diversification Opportunities for International Business and T Rex

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between International and ETQ is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and T Rex 2X Inverse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rex 2X 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 T Rex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rex 2X has no effect on the direction of International Business i.e., International Business and T Rex go up and down completely randomly.

Pair Corralation between International Business and T Rex

Considering the 90-day investment horizon International Business Machines is expected to generate 0.16 times more return on investment than T Rex. However, International Business Machines is 6.37 times less risky than T Rex. It trades about 0.29 of its potential returns per unit of risk. T Rex 2X Inverse is currently generating about -0.16 per unit of risk. If you would invest  21,190  in International Business Machines on September 12, 2024 and sell it today you would earn a total of  1,982  from holding International Business Machines or generate 9.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

International Business Machine  vs.  T Rex 2X Inverse

 Performance 
       Timeline  
International Business 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.
T Rex 2X 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days T Rex 2X Inverse has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

International Business and T Rex Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and T Rex

The main advantage of trading using opposite International Business and T Rex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, T Rex 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 T Rex will offset losses from the drop in T Rex's long position.
The idea behind International Business Machines and T Rex 2X Inverse 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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