Correlation Between International Business and Origin Materials

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

Diversification Opportunities for International Business and Origin Materials

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between International and Origin is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Origin Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials has no effect on the direction of International Business i.e., International Business and Origin Materials go up and down completely randomly.

Pair Corralation between International Business and Origin Materials

Considering the 90-day investment horizon International Business Machines is expected to generate 0.42 times more return on investment than Origin Materials. However, International Business Machines is 2.39 times less risky than Origin Materials. It trades about 0.05 of its potential returns per unit of risk. Origin Materials is currently generating about -0.02 per unit of risk. If you would invest  10,815  in International Business Machines on August 29, 2022 and sell it today you would earn a total of  4,022  from holding International Business Machines or generate 37.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

International Business Machine  vs.  Origin Materials

 Performance (%) 
       Timeline  
International Business 
International Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish fundamental drivers, International Business revealed solid returns over the last few months and may actually be approaching a breakup point.

International Price Channel

Origin Materials 
Origin Performance
0 of 100
Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Origin Price Channel

International Business and Origin Materials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Origin Materials

The main advantage of trading using opposite International Business and Origin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Origin Materials 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 Origin Materials will offset losses from the drop in Origin Materials' long position.
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The idea behind International Business Machines and Origin Materials 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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