Correlation Between International Business and AMP

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

Diversification Opportunities for International Business and AMP

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between International and AMP is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and AMP LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMP LIMITED 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 AMP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMP LIMITED has no effect on the direction of International Business i.e., International Business and AMP go up and down completely randomly.

Pair Corralation between International Business and AMP

Considering the 90-day investment horizon International Business Machines is expected to generate 0.57 times more return on investment than AMP. However, International Business Machines is 1.75 times less risky than AMP. It trades about 0.04 of its potential returns per unit of risk. AMP LIMITED is currently generating about -0.01 per unit of risk. If you would invest  10,872  in International Business Machines on May 15, 2022 and sell it today you would earn a total of  2,529  from holding International Business Machines or generate 23.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy96.58%
ValuesDaily Returns

International Business Machine  vs.  AMP LIMITED

 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 relatively steady fundamental drivers, International Business is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

International Price Channel

AMP LIMITED 
AMP Performance
0 of 100
Over the last 90 days AMP LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AMP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

AMP Price Channel

International Business and AMP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and AMP

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

AMP LIMITED

Pair trading matchups for AMP

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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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