Correlation Between Intel and Target

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

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

Diversification Opportunities for Intel and Target

-0.49

Correlation Coefficient

Intel  Target

Very good diversification

The 3 months correlation between Intel and Target is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Intel i.e., Intel and Target go up and down completely randomly.

Pair Corralation between Intel and Target

Given the investment horizon of 90 days Intel is expected to under-perform the Target. In addition to that, Intel is 1.15 times more volatile than Target. It trades about 0.0 of its total potential returns per unit of risk. Target is currently generating about 0.02 per unit of volatility. If you would invest  15,372  in Target on January 20, 2024 and sell it today you would earn a total of  1,286  from holding Target or generate 8.37% 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.  Target

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.

Target

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Target unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intel and Target

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

The idea behind Intel and Target 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .