Correlation Between International Business and BlackBerry

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

Diversification Opportunities for International Business and BlackBerry

-0.57

Correlation Coefficient

International Business  BlackBerry

Excellent diversification

The 3 months correlation between International and BlackBerry is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and BlackBerry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackBerry 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 BlackBerry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackBerry has no effect on the direction of International Business i.e., International Business and BlackBerry go up and down completely randomly.

Pair Corralation between International Business and BlackBerry

Considering the 90-day investment horizon International Business Machines is expected to under-perform the BlackBerry. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 4.05 times less risky than BlackBerry. The stock trades about -0.33 of its potential returns per unit of risk. The BlackBerry is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  262.00  in BlackBerry on January 20, 2024 and sell it today you would earn a total of  17.00  from holding BlackBerry or generate 6.49% return on investment over 90 days.

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

International Business Machine  vs.  BlackBerry

International Business

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in May 2024.

BlackBerry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackBerry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with International Business and BlackBerry

The main advantage of trading using opposite International Business and BlackBerry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, BlackBerry 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 BlackBerry will offset losses from the drop in BlackBerry's long position.

The idea behind International Business Machines and BlackBerry 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.