Correlation Between Global Brands and ITEQ Corp

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

By analyzing existing cross correlation between Global Brands Manufacture and ITEQ Corp, you can compare the effects of market volatilities on Global Brands and ITEQ Corp 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 Global Brands with a short position of ITEQ Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Brands and ITEQ Corp.

Diversification Opportunities for Global Brands and ITEQ Corp

-0.23

Correlation Coefficient

Global Brands  ITEQ Corp

Very good diversification

The 3 months correlation between Global and ITEQ is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Global Brands Manufacture and ITEQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITEQ Corp and Global Brands 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 Global Brands Manufacture are associated (or correlated) with ITEQ Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITEQ Corp has no effect on the direction of Global Brands i.e., Global Brands and ITEQ Corp go up and down completely randomly.

Pair Corralation between Global Brands and ITEQ Corp

Assuming the 90 days trading horizon Global Brands Manufacture is expected to generate 1.36 times more return on investment than ITEQ Corp. However, Global Brands is 1.36 times more volatile than ITEQ Corp. It trades about 0.03 of its potential returns per unit of risk. ITEQ Corp is currently generating about -0.11 per unit of risk. If you would invest  7,050  in Global Brands Manufacture on December 5, 2024 and sell it today you would earn a total of  140.00  from holding Global Brands Manufacture or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.14%
Values	Daily Returns

Global Brands Manufacture  vs.  ITEQ Corp

Global Brands Manufacture

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Brands Manufacture are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Global Brands showed solid returns over the last few months and may actually be approaching a breakup point.

ITEQ Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITEQ 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.

Pair Trading with Global Brands and ITEQ Corp

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

The idea behind Global Brands Manufacture and ITEQ 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.