Correlation Between International Business and First Trust

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

Diversification Opportunities for International Business and First Trust

  Correlation Coefficient

Weak diversification

The 3 months correlation between International and First is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and First Trust Multi-Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi-Asset 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Multi-Asset has no effect on the direction of International Business i.e., International Business and First Trust go up and down completely randomly.

Pair Corralation between International Business and First Trust

Considering the 90-day investment horizon International Business Machines is expected to generate 3.71 times more return on investment than First Trust. However, International Business is 3.71 times more volatile than First Trust Multi Asset. It trades about 0.08 of its potential returns per unit of risk. First Trust Multi Asset is currently generating about 0.01 per unit of risk. If you would invest  17,394  in International Business Machines on November 24, 2023 and sell it today you would earn a total of  576.00  from holding International Business Machines or generate 3.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

International Business Machine  vs.  First Trust Multi-Asset

International Business 

Risk-Adjusted Performance

13 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.
First Trust Multi-Asset 

Risk-Adjusted Performance

7 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Asset are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

International Business and First Trust Volatility Contrast

   Predicted Return Density   

Pair Trading with International Business and First Trust

The main advantage of trading using opposite International Business and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.
The idea behind International Business Machines and First Trust Multi Asset 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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