Correlation Between International Business and Select Fund

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

Diversification Opportunities for International Business and Select Fund

0.62

Correlation Coefficient

International Business  Select Fund

Poor diversification

The 3 months correlation between International and Select is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Select Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund A 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 Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund A has no effect on the direction of International Business i.e., International Business and Select Fund go up and down completely randomly.

Pair Corralation between International Business and Select Fund

Considering the 90-day investment horizon International Business is expected to generate 8.68 times less return on investment than Select Fund. In addition to that, International Business is 1.54 times more volatile than Select Fund A. It trades about 0.02 of its total potential returns per unit of risk. Select Fund A is currently generating about 0.24 per unit of volatility. If you would invest  10,587  in Select Fund A on May 5, 2025 and sell it today you would earn a total of  1,724  from holding Select Fund A or generate 16.28% return on investment over 90 days.

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

International Business Machine  vs.  Select Fund A

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 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.

Select Fund A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund A are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Select Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and Select Fund

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

The idea behind International Business Machines and Select Fund A 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.