Correlation Between International Business and Cantaloupe

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

Diversification Opportunities for International Business and Cantaloupe

-0.39

Correlation Coefficient

International Business  Cantaloupe

Very good diversification

The 3 months correlation between International and Cantaloupe is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Cantaloupe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantaloupe 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 Cantaloupe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantaloupe has no effect on the direction of International Business i.e., International Business and Cantaloupe go up and down completely randomly.

Pair Corralation between International Business and Cantaloupe

Considering the 90-day investment horizon International Business Machines is expected to under-perform the Cantaloupe. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 1.64 times less risky than Cantaloupe. The stock trades about -0.33 of its potential returns per unit of risk. The Cantaloupe is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  637.00  in Cantaloupe on January 20, 2024 and sell it today you would lose (20.00) from holding Cantaloupe or give up 3.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

International Business Machine  vs.  Cantaloupe

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.

Cantaloupe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cantaloupe has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with International Business and Cantaloupe

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

The idea behind International Business Machines and Cantaloupe 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.