Correlation Between International Business and Frasers Property

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

Diversification Opportunities for International Business and Frasers Property

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between International and Frasers is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Frasers Property Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frasers Property 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 Frasers Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frasers Property has no effect on the direction of International Business i.e., International Business and Frasers Property go up and down completely randomly.

Pair Corralation between International Business and Frasers Property

Considering the 90-day investment horizon International Business Machines is expected to generate 1.1 times more return on investment than Frasers Property. However, International Business is 1.1 times more volatile than Frasers Property Limited. It trades about 0.15 of its potential returns per unit of risk. Frasers Property Limited is currently generating about 0.02 per unit of risk. If you would invest  12,621  in International Business Machines on December 29, 2023 and sell it today you would earn a total of  6,459  from holding International Business Machines or generate 51.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.6%
ValuesDaily Returns

International Business Machine  vs.  Frasers Property Limited

 Performance 
       Timeline  
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.
Frasers Property 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Frasers Property Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Frasers Property reported solid returns over the last few months and may actually be approaching a breakup point.

International Business and Frasers Property Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Frasers Property

The main advantage of trading using opposite International Business and Frasers Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Frasers Property 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 Frasers Property will offset losses from the drop in Frasers Property's long position.
The idea behind International Business Machines and Frasers Property Limited 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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