Correlation Between Intel and Best Buy

Can any of the company-specific risk be diversified away by investing in both Intel and Best Buy 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 Intel and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Intel and Best Buy Co, you can compare the effects of market volatilities on Intel and Best Buy 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 Intel with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and Best Buy.

Diversification Opportunities for Intel and Best Buy

-0.54

Correlation Coefficient

Intel  Best Buy

Excellent diversification

The 3 months correlation between Intel and Best is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Intel 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 Intel are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Intel i.e., Intel and Best Buy go up and down completely randomly.

Pair Corralation between Intel and Best Buy

Given the investment horizon of 90 days Intel is expected to under-perform the Best Buy. In addition to that, Intel is 1.55 times more volatile than Best Buy Co. It trades about -0.29 of its total potential returns per unit of risk. Best Buy Co is currently generating about 0.01 per unit of volatility. If you would invest  7,620  in Best Buy Co on January 17, 2024 and sell it today you would earn a total of  9.00  from holding Best Buy Co or generate 0.12% return on investment over 90 days.

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

Intel  vs.  Best Buy Co

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Best Buy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Best Buy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Intel and Best Buy

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

The idea behind Intel and Best Buy Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.