Correlation Between Uniform Industrial and IBF Financial

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

By analyzing existing cross correlation between Uniform Industrial Corp and IBF Financial Holdings, you can compare the effects of market volatilities on Uniform Industrial and IBF Financial 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 Uniform Industrial with a short position of IBF Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uniform Industrial and IBF Financial.

Diversification Opportunities for Uniform Industrial and IBF Financial

0.22

Correlation Coefficient

Uniform Industrial  IBF Financial

Modest diversification

The 3 months correlation between Uniform and IBF is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Uniform Industrial Corp and IBF Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBF Financial Holdings and Uniform Industrial 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 Uniform Industrial Corp are associated (or correlated) with IBF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBF Financial Holdings has no effect on the direction of Uniform Industrial i.e., Uniform Industrial and IBF Financial go up and down completely randomly.

Pair Corralation between Uniform Industrial and IBF Financial

Assuming the 90 days trading horizon Uniform Industrial Corp is expected to under-perform the IBF Financial. In addition to that, Uniform Industrial is 2.0 times more volatile than IBF Financial Holdings. It trades about -0.1 of its total potential returns per unit of risk. IBF Financial Holdings is currently generating about -0.04 per unit of volatility. If you would invest  1,650  in IBF Financial Holdings on September 29, 2024 and sell it today you would lose (130.00) from holding IBF Financial Holdings or give up 7.88% of portfolio value over 90 days.

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

Uniform Industrial Corp  vs.  IBF Financial Holdings

Uniform Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uniform Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

IBF Financial Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IBF Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IBF Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Uniform Industrial and IBF Financial

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

The idea behind Uniform Industrial Corp and IBF Financial Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.