Correlation Between Intel and AETNA

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

By analyzing existing cross correlation between Intel and AETNA INC NEW, you can compare the effects of market volatilities on Intel and AETNA 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 Intel with a short position of AETNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and AETNA.

Diversification Opportunities for Intel and AETNA

-0.63

Correlation Coefficient

Intel  AETNA

Excellent diversification

The 3 months correlation between Intel and AETNA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Intel and AETNA INC NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AETNA INC NEW and Intel 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 Intel are associated (or correlated) with AETNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AETNA INC NEW has no effect on the direction of Intel i.e., Intel and AETNA go up and down completely randomly.

Pair Corralation between Intel and AETNA

Given the investment horizon of 90 days Intel is expected to generate 2.0 times more return on investment than AETNA. However, Intel is 2.0 times more volatile than AETNA INC NEW. It trades about 0.12 of its potential returns per unit of risk. AETNA INC NEW is currently generating about -0.06 per unit of risk. If you would invest  2,010  in Intel on September 3, 2024 and sell it today you would earn a total of  395.00  from holding Intel or generate 19.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.63%
Values	Daily Returns

Intel  vs.  AETNA INC NEW

Intel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Intel exhibited solid returns over the last few months and may actually be approaching a breakup point.

AETNA INC NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AETNA INC NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AETNA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intel and AETNA

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

The idea behind Intel and AETNA INC NEW 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.