Correlation Between CryoLife and International Business

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

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

Diversification Opportunities for CryoLife and International Business

0.6

Correlation Coefficient

CryoLife  International Business

Poor diversification

The 3 months correlation between CryoLife and International is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CryoLife and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and CryoLife 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 CryoLife 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 CryoLife i.e., CryoLife and International Business go up and down completely randomly.

Pair Corralation between CryoLife and International Business

Assuming the 90 days horizon CryoLife is expected to generate 1.39 times more return on investment than International Business. However, CryoLife is 1.39 times more volatile than International Business Machines. It trades about 0.11 of its potential returns per unit of risk. International Business Machines is currently generating about 0.13 per unit of risk. If you would invest  1,600  in CryoLife on September 23, 2024 and sell it today you would earn a total of  1,075  from holding CryoLife or generate 67.19% return on investment over 90 days.

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

CryoLife  vs.  International Business Machine

CryoLife

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CryoLife are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CryoLife reported solid returns over the last few months and may actually be approaching a breakup point.

International Business

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CryoLife and International Business

The main advantage of trading using opposite CryoLife and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CryoLife 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 CryoLife 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.