Correlation Between International Business and SentinelOne

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

Diversification Opportunities for International Business and SentinelOne

-0.03

Correlation Coefficient

International Business  SentinelOne

Good diversification

The 3 months correlation between International and SentinelOne is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and SentinelOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SentinelOne 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 SentinelOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SentinelOne has no effect on the direction of International Business i.e., International Business and SentinelOne go up and down completely randomly.

Pair Corralation between International Business and SentinelOne

Considering the 90-day investment horizon International Business Machines is expected to under-perform the SentinelOne. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.17 times less risky than SentinelOne. The stock trades about -0.28 of its potential returns per unit of risk. The SentinelOne is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  2,268  in SentinelOne on January 27, 2024 and sell it today you would lose (148.00) from holding SentinelOne or give up 6.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

International Business Machine  vs.  SentinelOne

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with International Business and SentinelOne

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

The idea behind International Business Machines and SentinelOne 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.