Correlation Between Steel Connect and International Business

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Can any of the company-specific risk be diversified away by investing in both Steel Connect and International Business 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 Steel Connect and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Connect and International Business Machines, you can compare the effects of market volatilities on Steel Connect and International Business 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 Steel Connect with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Connect and International Business.

Diversification Opportunities for Steel Connect and International Business

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Steel and International is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Steel Connect and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Steel Connect 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 Steel Connect are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Steel Connect i.e., Steel Connect and International Business go up and down completely randomly.

Pair Corralation between Steel Connect and International Business

Given the investment horizon of 90 days Steel Connect is expected to under-perform the International Business. In addition to that, Steel Connect is 4.1 times more volatile than International Business Machines. It trades about -0.17 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.39 per unit of volatility. If you would invest  13,522  in International Business Machines on September 3, 2022 and sell it today you would earn a total of  1,345  from holding International Business Machines or generate 9.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Steel Connect  vs.  International Business Machine

 Performance (%) 
       Timeline  
Steel Connect 
Steel Performance
0 of 100
Over the last 90 days Steel Connect has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Steel Price Channel

International Business 
International Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, International Business revealed solid returns over the last few months and may actually be approaching a breakup point.

International Price Channel

Steel Connect and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Connect and International Business

The main advantage of trading using opposite Steel Connect and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Connect position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.
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The idea behind Steel Connect and International Business Machines 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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