Correlation Between International Consolidated and Capital Drilling

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

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

Diversification Opportunities for International Consolidated and Capital Drilling

-0.23

Correlation Coefficient

International Consolidated  Capital Drilling

Very good diversification

The 3 months correlation between International and Capital is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling and International Consolidated 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 Consolidated Airlines are associated (or correlated) with Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of International Consolidated i.e., International Consolidated and Capital Drilling go up and down completely randomly.

Pair Corralation between International Consolidated and Capital Drilling

Assuming the 90 days trading horizon International Consolidated Airlines is expected to generate 0.87 times more return on investment than Capital Drilling. However, International Consolidated Airlines is 1.15 times less risky than Capital Drilling. It trades about 0.36 of its potential returns per unit of risk. Capital Drilling is currently generating about 0.02 per unit of risk. If you would invest  20,540  in International Consolidated Airlines on September 28, 2024 and sell it today you would earn a total of  9,610  from holding International Consolidated Airlines or generate 46.79% return on investment over 90 days.

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

International Consolidated Air  vs.  Capital Drilling

International Consolidated

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Capital Drilling

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Drilling are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Capital Drilling 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 Consolidated and Capital Drilling

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

The idea behind International Consolidated Airlines and Capital Drilling 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.