Correlation Between Cactus and International Business
Can any of the company-specific risk be diversified away by investing in both Cactus 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 Cactus and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cactus Inc and International Business Machines, you can compare the effects of market volatilities on Cactus 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 Cactus with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cactus and International Business.
Diversification Opportunities for Cactus and International Business
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cactus and International is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Cactus 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 Cactus Inc 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 Cactus i.e., Cactus and International Business go up and down completely randomly.
Pair Corralation between Cactus and International Business
Considering the 90-day investment horizon Cactus is expected to generate 1.54 times less return on investment than International Business. In addition to that, Cactus is 2.16 times more volatile than International Business Machines. It trades about 0.02 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.07 per unit of volatility. If you would invest 12,532 in International Business Machines on January 26, 2024 and sell it today you would earn a total of 5,878 from holding International Business Machines or generate 46.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cactus Inc vs. International Business Machine
Performance |
| Timeline |
| Cactus Inc |
| International Business |
Cactus and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cactus and International Business
The main advantage of trading using opposite Cactus and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cactus 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.| Cactus vs. Expro Group Holdings | Cactus vs. Ranger Energy Services | Cactus vs. MRC Global | Cactus vs. Now Inc |
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 the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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