Correlation Between CRA International and International Business

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

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

Diversification Opportunities for CRA International and International Business

0.03

Correlation Coefficient

CRA International  International Business

Significant diversification

The 3 months correlation between CRA and International is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and CRA International 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 CRA International 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 CRA International i.e., CRA International and International Business go up and down completely randomly.

Pair Corralation between CRA International and International Business

Given the investment horizon of 90 days CRA International is expected to under-perform the International Business. In addition to that, CRA International is 1.95 times more volatile than International Business Machines. It trades about -0.08 of its total potential returns per unit of risk. International Business Machines is currently generating about -0.06 per unit of volatility. If you would invest  22,883  in International Business Machines on September 27, 2024 and sell it today you would lose (442.00) from holding International Business Machines or give up 1.93% of portfolio value over 90 days.

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

CRA International  vs.  International Business Machine

CRA International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CRA International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CRA International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

International Business

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CRA International and International Business

The main advantage of trading using opposite CRA International and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRA International 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 CRA International 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.