Correlation Between Agriculture Natural and IB Acquisition

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

By analyzing existing cross correlation between Agriculture Natural Solutions and IB Acquisition Corp, you can compare the effects of market volatilities on Agriculture Natural and IB Acquisition 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 Agriculture Natural with a short position of IB Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agriculture Natural and IB Acquisition.

Diversification Opportunities for Agriculture Natural and IB Acquisition

0.07

Correlation Coefficient

Agriculture Natural  IB Acquisition

Significant diversification

The 3 months correlation between Agriculture and IBACR is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Agriculture Natural Solutions and IB Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IB Acquisition Corp and Agriculture Natural 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 Agriculture Natural Solutions are associated (or correlated) with IB Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IB Acquisition Corp has no effect on the direction of Agriculture Natural i.e., Agriculture Natural and IB Acquisition go up and down completely randomly.

Pair Corralation between Agriculture Natural and IB Acquisition

Assuming the 90 days horizon Agriculture Natural is expected to generate 3.44 times less return on investment than IB Acquisition. But when comparing it to its historical volatility, Agriculture Natural Solutions is 2.17 times less risky than IB Acquisition. It trades about 0.06 of its potential returns per unit of risk. IB Acquisition Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.50  in IB Acquisition Corp on December 29, 2024 and sell it today you would earn a total of  1.01  from holding IB Acquisition Corp or generate 15.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.72%
Values	Daily Returns

Agriculture Natural Solutions  vs.  IB Acquisition Corp

Agriculture Natural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agriculture Natural Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Agriculture Natural showed solid returns over the last few months and may actually be approaching a breakup point.

IB Acquisition Corp

Risk-Adjusted Performance

OK

Over the last 90 days IB Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unsteady fundamental indicators, IB Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agriculture Natural and IB Acquisition

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

The idea behind Agriculture Natural Solutions and IB Acquisition 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.