Correlation Between IBASE Technology and InnoDisk

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

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

Diversification Opportunities for IBASE Technology and InnoDisk

0.51

Correlation Coefficient

IBASE Technology  InnoDisk

Very weak diversification

The 3 months correlation between IBASE and InnoDisk is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding IBASE Technology and InnoDisk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoDisk and IBASE Technology 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 IBASE Technology are associated (or correlated) with InnoDisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoDisk has no effect on the direction of IBASE Technology i.e., IBASE Technology and InnoDisk go up and down completely randomly.

Pair Corralation between IBASE Technology and InnoDisk

Assuming the 90 days trading horizon IBASE Technology is expected to generate 0.72 times more return on investment than InnoDisk. However, IBASE Technology is 1.38 times less risky than InnoDisk. It trades about 0.0 of its potential returns per unit of risk. InnoDisk is currently generating about -0.22 per unit of risk. If you would invest  7,220  in IBASE Technology on October 13, 2024 and sell it today you would lose (30.00) from holding IBASE Technology or give up 0.42% of portfolio value over 90 days.

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

IBASE Technology  vs.  InnoDisk

IBASE Technology

Risk-Adjusted Performance

0 of 100

Weak

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

InnoDisk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InnoDisk 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with IBASE Technology and InnoDisk

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

The idea behind IBASE Technology and InnoDisk 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.