Correlation Between International Business and First Trust
Can any of the company-specific risk be diversified away by investing in both International Business and First Trust 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 First Trust 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 First Trust Exchange Traded, you can compare the effects of market volatilities on International Business and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and First Trust.
Diversification Opportunities for International Business and First Trust
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of International Business i.e., International Business and First Trust go up and down completely randomly.
Pair Corralation between International Business and First Trust
Considering the 90-day investment horizon International Business Machines is expected to generate 1.72 times more return on investment than First Trust. However, International Business is 1.72 times more volatile than First Trust Exchange Traded. It trades about 0.38 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.24 per unit of risk. If you would invest 20,510 in International Business Machines on September 1, 2024 and sell it today you would earn a total of 2,231 from holding International Business Machines or generate 10.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
International Business Machine vs. First Trust Exchange Traded
Performance |
| Timeline |
| International Business |
| First Trust Exchange |
International Business and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and First Trust
The main advantage of trading using opposite International Business and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| International Business vs. FiscalNote Holdings | International Business vs. Innodata | International Business vs. Aurora Innovation | International Business vs. Conduent |
| First Trust vs. FT Vest Equity | First Trust vs. Northern Lights | First Trust vs. Dimensional International High | First Trust vs. Matthews China Discovery |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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