Correlation Between Total Soft and InfoBank

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

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

Diversification Opportunities for Total Soft and InfoBank

-0.5

Correlation Coefficient

Total Soft  InfoBank

Very good diversification

The 3 months correlation between Total and InfoBank is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and InfoBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InfoBank and Total Soft 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 Total Soft Bank are associated (or correlated) with InfoBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InfoBank has no effect on the direction of Total Soft i.e., Total Soft and InfoBank go up and down completely randomly.

Pair Corralation between Total Soft and InfoBank

Assuming the 90 days trading horizon Total Soft is expected to generate 1.98 times less return on investment than InfoBank. In addition to that, Total Soft is 1.1 times more volatile than InfoBank. It trades about 0.02 of its total potential returns per unit of risk. InfoBank is currently generating about 0.05 per unit of volatility. If you would invest  660,000  in InfoBank on August 31, 2024 and sell it today you would earn a total of  46,000  from holding InfoBank or generate 6.97% return on investment over 90 days.

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

Total Soft Bank  vs.  InfoBank

Total Soft Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Total Soft is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

InfoBank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InfoBank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, InfoBank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Total Soft and InfoBank

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

The idea behind Total Soft Bank and InfoBank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..