Correlation Between IBF Financial and S Tech

Can any of the company-specific risk be diversified away by investing in both IBF Financial and S Tech 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 S Tech 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 S Tech Corp, you can compare the effects of market volatilities on IBF Financial and S Tech 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 S Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBF Financial and S Tech.

Diversification Opportunities for IBF Financial and S Tech

0.48

Correlation Coefficient

IBF Financial  S Tech

Very weak diversification

The 3 months correlation between IBF and 1584 is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and S Tech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S Tech Corp 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 S Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S Tech Corp has no effect on the direction of IBF Financial i.e., IBF Financial and S Tech go up and down completely randomly.

Pair Corralation between IBF Financial and S Tech

Assuming the 90 days trading horizon IBF Financial Holdings is expected to generate 0.52 times more return on investment than S Tech. However, IBF Financial Holdings is 1.93 times less risky than S Tech. It trades about 0.04 of its potential returns per unit of risk. S Tech Corp is currently generating about -0.23 per unit of risk. If you would invest  1,480  in IBF Financial Holdings on September 18, 2024 and sell it today you would earn a total of  30.00  from holding IBF Financial Holdings or generate 2.03% return on investment over 90 days.

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

IBF Financial Holdings  vs.  S Tech Corp

IBF Financial Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IBF Financial Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

S Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days S Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with IBF Financial and S Tech

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

The idea behind IBF Financial Holdings and S Tech Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.