Correlation Between IBF Financial and Mega Financial

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

Diversification Opportunities for IBF Financial and Mega Financial

-0.32

Correlation Coefficient

IBF Financial  Mega Financial

Very good diversification

The 3 months correlation between IBF and Mega is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and Mega Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Financial Holding 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 Mega Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Financial Holding has no effect on the direction of IBF Financial i.e., IBF Financial and Mega Financial go up and down completely randomly.

Pair Corralation between IBF Financial and Mega Financial

Assuming the 90 days trading horizon IBF Financial Holdings is expected to generate 1.03 times more return on investment than Mega Financial. However, IBF Financial is 1.03 times more volatile than Mega Financial Holding. It trades about 0.26 of its potential returns per unit of risk. Mega Financial Holding is currently generating about -0.03 per unit of risk. If you would invest  1,450  in IBF Financial Holdings on September 17, 2024 and sell it today you would earn a total of  60.00  from holding IBF Financial Holdings or generate 4.14% return on investment over 90 days.

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

IBF Financial Holdings  vs.  Mega Financial Holding

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.

Mega Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind IBF Financial Holdings and Mega Financial Holding 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..