Correlation Between International Business and Accenture Plc
Can any of the company-specific risk be diversified away by investing in both International Business and Accenture Plc 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 Accenture Plc 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 Accenture plc, you can compare the effects of market volatilities on International Business and Accenture Plc 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 Accenture Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Accenture Plc.
Diversification Opportunities for International Business and Accenture Plc
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Accenture is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Accenture plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accenture plc 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 Accenture Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accenture plc has no effect on the direction of International Business i.e., International Business and Accenture Plc go up and down completely randomly.
Pair Corralation between International Business and Accenture Plc
Assuming the 90 days trading horizon International Business Machines is expected to generate 1.04 times more return on investment than Accenture Plc. However, International Business is 1.04 times more volatile than Accenture plc. It trades about 0.28 of its potential returns per unit of risk. Accenture plc is currently generating about 0.05 per unit of risk. If you would invest 120,147 in International Business Machines on August 30, 2024 and sell it today you would earn a total of 13,752 from holding International Business Machines or generate 11.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Accenture plc
Performance |
| Timeline |
| International Business |
| Accenture plc |
International Business and Accenture Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Accenture Plc
The main advantage of trading using opposite International Business and Accenture Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Accenture Plc 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 Accenture Plc will offset losses from the drop in Accenture Plc's long position.The idea behind International Business Machines and Accenture plc 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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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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