Correlation Between Wipro and International Business

Can any of the company-specific risk be diversified away by investing in both Wipro 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 Wipro and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wipro Limited and International Business Machines, you can compare the effects of market volatilities on Wipro 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 Wipro with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wipro and International Business.

Diversification Opportunities for Wipro and International Business

0.53

Correlation Coefficient

Wipro  International Business

Very weak diversification

The 3 months correlation between Wipro and International is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Wipro Limited and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Wipro 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 Wipro Limited 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 Wipro i.e., Wipro and International Business go up and down completely randomly.

Pair Corralation between Wipro and International Business

Assuming the 90 days trading horizon Wipro Limited is expected to under-perform the International Business. In addition to that, Wipro is 1.03 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 -0.09 per unit of volatility. If you would invest  16,909  in International Business Machines on February 20, 2024 and sell it today you would lose (1,457) from holding International Business Machines or give up 8.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Wipro Limited  vs.  International Business Machine

Wipro Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wipro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Wipro and International Business

The main advantage of trading using opposite Wipro and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wipro 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.

The idea behind Wipro Limited 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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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.