Correlation Between International Business and Best Buy

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

Diversification Opportunities for International Business and Best Buy

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between International and Best Buy is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Best Buy Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of International Business i.e., International Business and Best Buy go up and down completely randomly.

Pair Corralation between International Business and Best Buy

Considering the 90-day investment horizon International Business Machines is expected to under-perform the Best Buy. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 2.2 times less risky than Best Buy. The stock trades about -0.26 of its potential returns per unit of risk. The Best Buy Company is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  7,325  in Best Buy Company on June 27, 2022 and sell it today you would lose (447.00)  from holding Best Buy Company or give up 6.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

International Business Machine  vs.  Best Buy Company

 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 weak 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

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

Best Buy Price Channel

International Business and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Best Buy

The main advantage of trading using opposite International Business and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
International Business vs. Industrias Bachoco SA
The idea behind International Business Machines and Best Buy Company 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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