Correlation Between International Business and Pomifrutas

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

Diversification Opportunities for International Business and Pomifrutas

0.73

Correlation Coefficient

International Business  Pomifrutas

Poor diversification

The 3 months correlation between International and Pomifrutas is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Pomifrutas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pomifrutas SA 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 Pomifrutas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pomifrutas SA has no effect on the direction of International Business i.e., International Business and Pomifrutas go up and down completely randomly.

Pair Corralation between International Business and Pomifrutas

Considering the 90-day investment horizon International Business Machines is expected to generate 0.29 times more return on investment than Pomifrutas. However, International Business Machines is 3.43 times less risky than Pomifrutas. It trades about 0.05 of its potential returns per unit of risk. Pomifrutas SA is currently generating about -0.01 per unit of risk. If you would invest  12,440  in International Business Machines on March 8, 2024 and sell it today you would earn a total of  4,380  from holding International Business Machines or generate 35.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.56%
Values	Daily Returns

International Business Machine  vs.  Pomifrutas SA

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 unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pomifrutas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pomifrutas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pomifrutas is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with International Business and Pomifrutas

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

The idea behind International Business Machines and Pomifrutas SA 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.