Correlation Between ICD and Fine Besteel

Can any of the company-specific risk be diversified away by investing in both ICD and Fine Besteel 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 ICD and Fine Besteel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ICD Co and Fine Besteel Co, you can compare the effects of market volatilities on ICD and Fine Besteel 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 ICD with a short position of Fine Besteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICD and Fine Besteel.

Diversification Opportunities for ICD and Fine Besteel

-0.34

Correlation Coefficient

ICD  Fine Besteel

Very good diversification

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

Pair Corralation between ICD and Fine Besteel

Assuming the 90 days trading horizon ICD Co is expected to under-perform the Fine Besteel. But the stock apears to be less risky and, when comparing its historical volatility, ICD Co is 1.34 times less risky than Fine Besteel. The stock trades about -0.16 of its potential returns per unit of risk. The Fine Besteel Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  89,700  in Fine Besteel Co on September 3, 2024 and sell it today you would earn a total of  15,000  from holding Fine Besteel Co or generate 16.72% return on investment over 90 days.

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

ICD Co  vs.  Fine Besteel Co

ICD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICD Co 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Fine Besteel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fine Besteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICD and Fine Besteel

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

The idea behind ICD Co and Fine Besteel Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.