Correlation Between International Business and POET Technologies
Can any of the company-specific risk be diversified away by investing in both International Business and POET Technologies 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 POET Technologies 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 POET Technologies, you can compare the effects of market volatilities on International Business and POET Technologies 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 POET Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and POET Technologies.
Diversification Opportunities for International Business and POET Technologies
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and POET is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and POET Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POET 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 POET Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POET Technologies has no effect on the direction of International Business i.e., International Business and POET Technologies go up and down completely randomly.
Pair Corralation between International Business and POET Technologies
Considering the 90-day investment horizon International Business Machines is expected to generate 0.26 times more return on investment than POET Technologies. However, International Business Machines is 3.81 times less risky than POET Technologies. It trades about -0.14 of its potential returns per unit of risk. POET Technologies is currently generating about -0.14 per unit of risk. If you would invest 26,128 in International Business Machines on December 16, 2024 and sell it today you would lose (1,293) from holding International Business Machines or give up 4.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. POET Technologies
Performance |
| Timeline |
| International Business |
| POET Technologies |
International Business and POET Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and POET Technologies
The main advantage of trading using opposite International Business and POET Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, POET Technologies 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 POET Technologies will offset losses from the drop in POET Technologies' long position.| International Business vs. EPAM Systems | ||
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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