Correlation Between International Business and Rambus

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

Diversification Opportunities for International Business and Rambus

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between International and Rambus is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Rambus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rambus Inc 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 Rambus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rambus Inc has no effect on the direction of International Business i.e., International Business and Rambus go up and down completely randomly.

Pair Corralation between International Business and Rambus

Considering the 90-day investment horizon International Business is expected to generate 21.65 times less return on investment than Rambus. But when comparing it to its historical volatility, International Business Machines is 1.74 times less risky than Rambus. It trades about 0.02 of its potential returns per unit of risk. Rambus Inc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5,072  in Rambus Inc on May 4, 2025 and sell it today you would earn a total of  2,169  from holding Rambus Inc or generate 42.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.41%
ValuesDaily Returns

International Business Machine  vs.  Rambus Inc

 Performance 
       Timeline  
International Business 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 1 (%) 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.
Rambus Inc 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Rambus Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Rambus unveiled solid returns over the last few months and may actually be approaching a breakup point.

International Business and Rambus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Rambus

The main advantage of trading using opposite International Business and Rambus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Rambus 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 Rambus will offset losses from the drop in Rambus' long position.
The idea behind International Business Machines and Rambus Inc 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.
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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