Correlation Between International Business and H D

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

Diversification Opportunities for International Business and H D

-0.34

Correlation Coefficient

International Business  H D

Very good diversification

The 3 months correlation between International and HDIH is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and H D International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H D International 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 H D. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H D International has no effect on the direction of International Business i.e., International Business and H D go up and down completely randomly.

Pair Corralation between International Business and H D

Considering the 90-day investment horizon International Business is expected to generate 1.98 times less return on investment than H D. But when comparing it to its historical volatility, International Business Machines is 5.19 times less risky than H D. It trades about 0.09 of its potential returns per unit of risk. H D International Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.02  in H D International Holdings on September 19, 2024 and sell it today you would earn a total of  0.00  from holding H D International Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

International Business Machine  vs.  H D International Holdings

International Business

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

H D International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in H D International Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, H D demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and H D

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

The idea behind International Business Machines and H D International Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.