Correlation Between International Business and Conduent

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

Diversification Opportunities for International Business and Conduent

0.4

Correlation Coefficient

International Business  Conduent

Very weak diversification

The 3 months correlation between International and Conduent is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Conduent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conduent 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 Conduent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conduent has no effect on the direction of International Business i.e., International Business and Conduent go up and down completely randomly.

Pair Corralation between International Business and Conduent

Considering the 90-day investment horizon International Business is expected to generate 1.61 times less return on investment than Conduent. But when comparing it to its historical volatility, International Business Machines is 2.14 times less risky than Conduent. It trades about 0.08 of its potential returns per unit of risk. Conduent is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  384.00  in Conduent on September 15, 2024 and sell it today you would earn a total of  37.00  from holding Conduent or generate 9.64% return on investment over 90 days.

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

International Business Machine  vs.  Conduent

International Business

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Conduent

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Conduent are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Conduent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with International Business and Conduent

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

The idea behind International Business Machines and Conduent 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.