Correlation Between International Business and Computer

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

Diversification Opportunities for International Business and Computer

0.65

Correlation Coefficient

International Business  Computer

Poor diversification

The 3 months correlation between International and Computer is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Computer And Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer And 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 Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer And Technologies has no effect on the direction of International Business i.e., International Business and Computer go up and down completely randomly.

Pair Corralation between International Business and Computer

Assuming the 90 days horizon International Business is expected to generate 1.68 times less return on investment than Computer. In addition to that, International Business is 1.08 times more volatile than Computer And Technologies. It trades about 0.18 of its total potential returns per unit of risk. Computer And Technologies is currently generating about 0.33 per unit of volatility. If you would invest  14.00  in Computer And Technologies on February 15, 2025 and sell it today you would earn a total of  2.00  from holding Computer And Technologies or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

International Business Machine  vs.  Computer And Technologies

International Business

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, International Business is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Computer And Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Computer And Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Computer is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Business and Computer

The main advantage of trading using opposite International Business and Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Computer 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 Computer will offset losses from the drop in Computer's long position.

The idea behind International Business Machines and Computer And Technologies 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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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.