Correlation Between AGF AS and International Business

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

Diversification Opportunities for AGF AS and International Business

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between AGF and International is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding AGF AS and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and AGF AS 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 AGF AS 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 AGF AS i.e., AGF AS and International Business go up and down completely randomly.

Pair Corralation between AGF AS and International Business

Assuming the 90 days trading horizon AGF AS is expected to generate 2.08 times less return on investment than International Business. But when comparing it to its historical volatility, AGF AS is 1.35 times less risky than International Business. It trades about 0.07 of its potential returns per unit of risk. International Business Machines is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  18,487  in International Business Machines on December 29, 2023 and sell it today you would earn a total of  593.00  from holding International Business Machines or generate 3.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

AGF AS  vs.  International Business Machine

 Performance 
       Timeline  
AGF AS 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in AGF AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, AGF AS may actually be approaching a critical reversion point that can send shares even higher in April 2024.
International Business 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

AGF AS and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AGF AS and International Business

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