Correlation Between International Business and Advance Auto

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

Diversification Opportunities for International Business and Advance Auto

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between International and Advance is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of International Business i.e., International Business and Advance Auto go up and down completely randomly.

Pair Corralation between International Business and Advance Auto

Considering the 90-day investment horizon International Business Machines is expected to generate 0.74 times more return on investment than Advance Auto. However, International Business Machines is 1.36 times less risky than Advance Auto. It trades about 0.01 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.01 per unit of risk. If you would invest  12,088  in International Business Machines on June 29, 2022 and sell it today you would earn a total of  86.00  from holding International Business Machines or generate 0.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

International Business Machine  vs.  Advance Auto Parts

 Performance (%) 
       Timeline  
International Business 
International Performance
0 of 100
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's fundamental drivers remain relatively steady which may send shares a bit higher in October 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

International Price Channel

Advance Auto Parts 
Advance Performance
0 of 100
Over the last 90 days Advance Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

Advance Price Channel

International Business and Advance Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Advance Auto

The main advantage of trading using opposite International Business and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.
International Business vs. Clearwater Paper Corp
The idea behind International Business Machines and Advance Auto Parts 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.
Advance Auto vs. Clearwater Paper Corp
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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