Correlation Between IBF Financial and Tehmag Foods

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

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

Diversification Opportunities for IBF Financial and Tehmag Foods

0.82

Correlation Coefficient

IBF Financial  Tehmag Foods

Very poor diversification

The 3 months correlation between IBF and Tehmag is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and Tehmag Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tehmag Foods and IBF Financial 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 IBF Financial Holdings are associated (or correlated) with Tehmag Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tehmag Foods has no effect on the direction of IBF Financial i.e., IBF Financial and Tehmag Foods go up and down completely randomly.

Pair Corralation between IBF Financial and Tehmag Foods

Assuming the 90 days trading horizon IBF Financial is expected to generate 1.24 times less return on investment than Tehmag Foods. In addition to that, IBF Financial is 1.88 times more volatile than Tehmag Foods. It trades about 0.04 of its total potential returns per unit of risk. Tehmag Foods is currently generating about 0.08 per unit of volatility. If you would invest  23,863  in Tehmag Foods on October 7, 2024 and sell it today you would earn a total of  7,187  from holding Tehmag Foods or generate 30.12% return on investment over 90 days.

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

IBF Financial Holdings  vs.  Tehmag Foods

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.

Tehmag Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tehmag Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tehmag Foods 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 IBF Financial and Tehmag Foods

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

The idea behind IBF Financial Holdings and Tehmag Foods 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.