Correlation Between International Business and Golden Agri

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

Diversification Opportunities for International Business and Golden Agri

-0.66

Correlation Coefficient

International Business  Golden Agri

Excellent diversification

The 3 months correlation between International and Golden is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Golden Agri Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Agri Resources 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 Golden Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Agri Resources has no effect on the direction of International Business i.e., International Business and Golden Agri go up and down completely randomly.

Pair Corralation between International Business and Golden Agri

Considering the 90-day investment horizon International Business Machines is expected to generate 1.15 times more return on investment than Golden Agri. However, International Business is 1.15 times more volatile than Golden Agri Resources. It trades about 0.14 of its potential returns per unit of risk. Golden Agri Resources is currently generating about -0.1 per unit of risk. If you would invest  20,252  in International Business Machines on September 4, 2024 and sell it today you would earn a total of  2,648  from holding International Business Machines or generate 13.08% return on investment over 90 days.

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

International Business Machine  vs.  Golden Agri Resources

International Business

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

Golden Agri Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Agri Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with International Business and Golden Agri

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

The idea behind International Business Machines and Golden Agri Resources 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.