Correlation Between CGI and International Business
Can any of the company-specific risk be diversified away by investing in both CGI and International Business 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 CGI and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CGI Inc and International Business Machines, you can compare the effects of market volatilities on CGI and International Business 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 CGI with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of CGI and International Business.
Diversification Opportunities for CGI and International Business
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CGI and International is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CGI Inc and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and CGI 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 CGI Inc are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of CGI i.e., CGI and International Business go up and down completely randomly.
Pair Corralation between CGI and International Business
Considering the 90-day investment horizon CGI Inc is expected to generate 0.98 times more return on investment than International Business. However, CGI Inc is 1.02 times less risky than International Business. It trades about -0.18 of its potential returns per unit of risk. International Business Machines is currently generating about -0.2 per unit of risk. If you would invest 10,958 in CGI Inc on January 24, 2024 and sell it today you would lose (369.00) from holding CGI Inc or give up 3.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
CGI Inc vs. International Business Machine
Performance |
| Timeline |
| CGI Inc |
| International Business |
CGI and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CGI and International Business
The main advantage of trading using opposite CGI and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGI position performs unexpectedly, International Business 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 Business will offset losses from the drop in International Business' long position.The idea behind CGI Inc and International Business Machines 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.| International Business vs. FiscalNote Holdings | International Business vs. Innodata | International Business vs. Aurora Innovation | International Business vs. Conduent |
Check out your portfolio center.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.
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