Correlation Between International Business and KIMBERLY

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

Diversification Opportunities for International Business and KIMBERLY

0.09

Correlation Coefficient

International Business  KIMBERLY

Significant diversification

The 3 months correlation between International and KIMBERLY is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and KIMBERLY CLARK P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBERLY CLARK P 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 KIMBERLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBERLY CLARK P has no effect on the direction of International Business i.e., International Business and KIMBERLY go up and down completely randomly.

Pair Corralation between International Business and KIMBERLY

Considering the 90-day investment horizon International Business Machines is expected to generate 1.38 times more return on investment than KIMBERLY. However, International Business is 1.38 times more volatile than KIMBERLY CLARK P. It trades about 0.08 of its potential returns per unit of risk. KIMBERLY CLARK P is currently generating about -0.21 per unit of risk. If you would invest  21,546  in International Business Machines on September 15, 2024 and sell it today you would earn a total of  1,536  from holding International Business Machines or generate 7.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	54.69%
Values	Daily Returns

International Business Machine  vs.  KIMBERLY CLARK P

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.

KIMBERLY CLARK P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KIMBERLY CLARK P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for KIMBERLY CLARK P investors.

Pair Trading with International Business and KIMBERLY

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

The idea behind International Business Machines and KIMBERLY CLARK P 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.