Correlation Between Target and Intel

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Can any of the company-specific risk be diversified away by investing in both Target and Intel 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 Target and Intel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Intel, you can compare the effects of market volatilities on Target and Intel 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 Target with a short position of Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Intel.

Diversification Opportunities for Target and Intel

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Target and Intel is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Target and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel and Target 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 Target are associated (or correlated) with Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Target i.e., Target and Intel go up and down completely randomly.

Pair Corralation between Target and Intel

Considering the 90-day investment horizon Target is expected to generate 1.08 times more return on investment than Intel. However, Target is 1.08 times more volatile than Intel. It trades about 0.26 of its potential returns per unit of risk. Intel is currently generating about 0.1 per unit of risk. If you would invest  15,144  in Target on December 30, 2023 and sell it today you would earn a total of  2,577  from holding Target or generate 17.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Target  vs.  Intel

 Performance 
       Timeline  
Target 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Target unveiled solid returns over the last few months and may actually be approaching a breakup point.
Intel 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Intel is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Target and Intel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Target and Intel

The main advantage of trading using opposite Target and Intel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target position performs unexpectedly, Intel 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 Intel will offset losses from the drop in Intel's long position.
The idea behind Target and Intel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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