Correlation Between Stellar and International Consolidated
Can any of the company-specific risk be diversified away by investing in both Stellar and International Consolidated 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 Stellar and International Consolidated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and International Consolidated Airlines, you can compare the effects of market volatilities on Stellar and International Consolidated 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 Stellar with a short position of International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and International Consolidated.
Diversification Opportunities for Stellar and International Consolidated
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stellar and International is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated and Stellar 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 Stellar are associated (or correlated) with International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Stellar i.e., Stellar and International Consolidated go up and down completely randomly.
Pair Corralation between Stellar and International Consolidated
Assuming the 90 days trading horizon Stellar is expected to generate 5.75 times more return on investment than International Consolidated. However, Stellar is 5.75 times more volatile than International Consolidated Airlines. It trades about 0.21 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.07 per unit of risk. If you would invest 36.00 in Stellar on October 21, 2024 and sell it today you would earn a total of 13.00 from holding Stellar or generate 36.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Stellar vs. International Consolidated Air
Performance |
| Timeline |
| Stellar |
| International Consolidated |
Stellar and International Consolidated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and International Consolidated
The main advantage of trading using opposite Stellar and International Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar position performs unexpectedly, International Consolidated 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 International Consolidated will offset losses from the drop in International Consolidated's long position.The idea behind Stellar and International Consolidated Airlines 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.| International Consolidated vs. Inhome Prime Properties | International Consolidated vs. Aedas Homes SL | International Consolidated vs. Tier1 Technology SA | International Consolidated vs. Bankinter |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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