Correlation Between International Business and BLACK

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

Diversification Opportunities for International Business and BLACK

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between International and BLACK is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and BLACK HILLS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLACK HILLS P 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 BLACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLACK HILLS P has no effect on the direction of International Business i.e., International Business and BLACK go up and down completely randomly.

Pair Corralation between International Business and BLACK

Considering the 90-day investment horizon International Business Machines is expected to generate 2.57 times more return on investment than BLACK. However, International Business is 2.57 times more volatile than BLACK HILLS P. It trades about 0.41 of its potential returns per unit of risk. BLACK HILLS P is currently generating about -0.17 per unit of risk. If you would invest  20,471  in International Business Machines on September 3, 2024 and sell it today you would earn a total of  2,270  from holding International Business Machines or generate 11.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy80.0%
ValuesDaily Returns

International Business Machine  vs.  BLACK HILLS P

 Performance 
       Timeline  
International Business 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.
BLACK HILLS P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BLACK HILLS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BLACK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

International Business and BLACK Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and BLACK

The main advantage of trading using opposite International Business and BLACK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, BLACK 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 BLACK will offset losses from the drop in BLACK's long position.
The idea behind International Business Machines and BLACK HILLS P 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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