Correlation Between Tier1 Technology and International Consolidated

Can any of the company-specific risk be diversified away by investing in both Tier1 Technology and International Consolidated 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 Tier1 Technology and International Consolidated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tier1 Technology SA and International Consolidated Airlines, you can compare the effects of market volatilities on Tier1 Technology and International Consolidated 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 Tier1 Technology with a short position of International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tier1 Technology and International Consolidated.

Diversification Opportunities for Tier1 Technology and International Consolidated

0.67

Correlation Coefficient

Tier1 Technology  International Consolidated

Poor diversification

The 3 months correlation between Tier1 and International is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tier1 Technology SA and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated and Tier1 Technology 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 Tier1 Technology SA are associated (or correlated) with International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Tier1 Technology i.e., Tier1 Technology and International Consolidated go up and down completely randomly.

Pair Corralation between Tier1 Technology and International Consolidated

Assuming the 90 days trading horizon Tier1 Technology is expected to generate 3.38 times less return on investment than International Consolidated. In addition to that, Tier1 Technology is 1.36 times more volatile than International Consolidated Airlines. It trades about 0.07 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.34 per unit of volatility. If you would invest  213.00  in International Consolidated Airlines on September 1, 2024 and sell it today you would earn a total of  101.00  from holding International Consolidated Airlines or generate 47.42% return on investment over 90 days.

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

Tier1 Technology SA  vs.  International Consolidated Air

Tier1 Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tier1 Technology SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tier1 Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

International Consolidated

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tier1 Technology and International Consolidated

The main advantage of trading using opposite Tier1 Technology and International Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tier1 Technology position performs unexpectedly, International Consolidated 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 International Consolidated will offset losses from the drop in International Consolidated's long position.

The idea behind Tier1 Technology SA and International Consolidated Airlines 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.