Correlation Between International Business and NEP Old

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

Diversification Opportunities for International Business and NEP Old

-0.35

Correlation Coefficient

International Business  NEP Old

Very good diversification

The 3 months correlation between International and NEP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and NEP Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEP Old 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 NEP Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEP Old has no effect on the direction of International Business i.e., International Business and NEP Old go up and down completely randomly.

Pair Corralation between International Business and NEP Old

Considering the 90-day investment horizon International Business Machines is expected to generate 0.47 times more return on investment than NEP Old. However, International Business Machines is 2.11 times less risky than NEP Old. It trades about 0.12 of its potential returns per unit of risk. NEP Old is currently generating about -0.15 per unit of risk. If you would invest  16,537  in International Business Machines on March 5, 2025 and sell it today you would earn a total of  9,886  from holding International Business Machines or generate 59.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.26%
Values	Daily Returns

International Business Machine  vs.  NEP Old

International Business

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

NEP Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEP Old has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, NEP Old is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with International Business and NEP Old

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

The idea behind International Business Machines and NEP Old 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.