Correlation Between International Business and Globalfoundries
Can any of the company-specific risk be diversified away by investing in both International Business and Globalfoundries 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 Globalfoundries 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 Globalfoundries, you can compare the effects of market volatilities on International Business and Globalfoundries 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 Globalfoundries. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Globalfoundries.
Diversification Opportunities for International Business and Globalfoundries
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Globalfoundries is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of International Business i.e., International Business and Globalfoundries go up and down completely randomly.
Pair Corralation between International Business and Globalfoundries
Considering the 90-day investment horizon International Business Machines is expected to generate 0.29 times more return on investment than Globalfoundries. However, International Business Machines is 3.5 times less risky than Globalfoundries. It trades about 0.26 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.07 per unit of risk. If you would invest 20,879 in International Business Machines on August 30, 2024 and sell it today you would earn a total of 1,813 from holding International Business Machines or generate 8.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Globalfoundries
Performance |
| Timeline |
| International Business |
| Globalfoundries |
International Business and Globalfoundries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Globalfoundries
The main advantage of trading using opposite International Business and Globalfoundries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Globalfoundries 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 Globalfoundries will offset losses from the drop in Globalfoundries' long position.| International Business vs. The Hackett Group | International Business vs. Nayax | International Business vs. Formula Systems 1985 | International Business vs. Information Services Group |
| Globalfoundries vs. NXP Semiconductors NV | Globalfoundries vs. Analog Devices | Globalfoundries vs. ON Semiconductor | Globalfoundries vs. Lattice Semiconductor |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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