Correlation Between International Business and WisdomTree India

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

Diversification Opportunities for International Business and WisdomTree India

0.44

Correlation Coefficient

International Business  WisdomTree India

Very weak diversification

The 3 months correlation between International and WisdomTree is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and WisdomTree India Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree India Earnings 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 WisdomTree India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree India Earnings has no effect on the direction of International Business i.e., International Business and WisdomTree India go up and down completely randomly.

Pair Corralation between International Business and WisdomTree India

Considering the 90-day investment horizon International Business Machines is expected to under-perform the WisdomTree India. In addition to that, International Business is 1.71 times more volatile than WisdomTree India Earnings. It trades about -0.34 of its total potential returns per unit of risk. WisdomTree India Earnings is currently generating about 0.23 per unit of volatility. If you would invest  4,259  in WisdomTree India Earnings on January 20, 2024 and sell it today you would earn a total of  122.00  from holding WisdomTree India Earnings or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.3%
Values	Daily Returns

International Business Machine  vs.  WisdomTree India Earnings

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.

WisdomTree India Earnings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree India Earnings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, WisdomTree India is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with International Business and WisdomTree India

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

The idea behind International Business Machines and WisdomTree India Earnings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.