Correlation Between Analyst IMS and First International

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

By analyzing existing cross correlation between Analyst IMS Investment and First International Bank, you can compare the effects of market volatilities on Analyst IMS and First International 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 Analyst IMS with a short position of First International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analyst IMS and First International.

Diversification Opportunities for Analyst IMS and First International

0.89

Correlation Coefficient

Analyst IMS  First International

Very poor diversification

The 3 months correlation between Analyst and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Analyst IMS Investment and First International Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First International Bank and Analyst IMS 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 Analyst IMS Investment are associated (or correlated) with First International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First International Bank has no effect on the direction of Analyst IMS i.e., Analyst IMS and First International go up and down completely randomly.

Pair Corralation between Analyst IMS and First International

Assuming the 90 days trading horizon Analyst IMS Investment is expected to generate 1.55 times more return on investment than First International. However, Analyst IMS is 1.55 times more volatile than First International Bank. It trades about 0.51 of its potential returns per unit of risk. First International Bank is currently generating about 0.14 per unit of risk. If you would invest  554,700  in Analyst IMS Investment on December 21, 2024 and sell it today you would earn a total of  347,400  from holding Analyst IMS Investment or generate 62.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.08%
Values	Daily Returns

Analyst IMS Investment  vs.  First International Bank

Analyst IMS Investment

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Analyst IMS Investment are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Analyst IMS sustained solid returns over the last few months and may actually be approaching a breakup point.

First International Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First International Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Analyst IMS and First International

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

The idea behind Analyst IMS Investment and First International Bank 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.