Correlation Between Intel and International Business

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

By analyzing existing cross correlation between Intel and International Business Machines, you can compare the effects of market volatilities on Intel and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and International Business.

Diversification Opportunities for Intel and International Business

-0.08

Correlation Coefficient

Intel  International Business

Good diversification

The 3 months correlation between Intel and International is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Intel and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Intel i.e., Intel and International Business go up and down completely randomly.

Pair Corralation between Intel and International Business

Given the investment horizon of 90 days Intel is expected to under-perform the International Business. In addition to that, Intel is 1.92 times more volatile than International Business Machines. It trades about -0.01 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.07 per unit of volatility. If you would invest  12,373  in International Business Machines on January 25, 2024 and sell it today you would earn a total of  5,846  from holding International Business Machines or generate 47.25% return on investment over 90 days.

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

Intel  vs.  International Business Machine

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.

International Business

Risk-Adjusted Performance

0 of 100

Insignificant

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 very healthy fundamental drivers, International Business is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Intel and International Business

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

The idea behind Intel and International Business Machines 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.