Correlation Between International Consolidated and Comba Telecom
Can any of the company-specific risk be diversified away by investing in both International Consolidated and Comba Telecom 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 Consolidated and Comba Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and Comba Telecom Systems, you can compare the effects of market volatilities on International Consolidated and Comba Telecom 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 Consolidated with a short position of Comba Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Comba Telecom.
Diversification Opportunities for International Consolidated and Comba Telecom
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between International and Comba is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Comba Telecom Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comba Telecom Systems and International Consolidated 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 Consolidated Airlines are associated (or correlated) with Comba Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comba Telecom Systems has no effect on the direction of International Consolidated i.e., International Consolidated and Comba Telecom go up and down completely randomly.
Pair Corralation between International Consolidated and Comba Telecom
Assuming the 90 days horizon International Consolidated is expected to generate 1.3 times less return on investment than Comba Telecom. But when comparing it to its historical volatility, International Consolidated Airlines is 2.41 times less risky than Comba Telecom. It trades about 0.25 of its potential returns per unit of risk. Comba Telecom Systems is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Comba Telecom Systems on October 11, 2024 and sell it today you would earn a total of 1.00 from holding Comba Telecom Systems or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Consolidated Air vs. Comba Telecom Systems
Performance |
| Timeline |
| International Consolidated |
| Comba Telecom Systems |
International Consolidated and Comba Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and Comba Telecom
The main advantage of trading using opposite International Consolidated and Comba Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated position performs unexpectedly, Comba Telecom 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 Comba Telecom will offset losses from the drop in Comba Telecom's long position.The idea behind International Consolidated Airlines and Comba Telecom Systems 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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