Correlation Between Big Bird and IBL HealthCare

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

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

Diversification Opportunities for Big Bird and IBL HealthCare

0.59

Correlation Coefficient

Big Bird  IBL HealthCare

Very weak diversification

The 3 months correlation between Big and IBL is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and IBL HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBL HealthCare and Big Bird 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 Big Bird Foods are associated (or correlated) with IBL HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBL HealthCare has no effect on the direction of Big Bird i.e., Big Bird and IBL HealthCare go up and down completely randomly.

Pair Corralation between Big Bird and IBL HealthCare

Assuming the 90 days trading horizon Big Bird Foods is expected to generate 1.4 times more return on investment than IBL HealthCare. However, Big Bird is 1.4 times more volatile than IBL HealthCare. It trades about 0.01 of its potential returns per unit of risk. IBL HealthCare is currently generating about -0.07 per unit of risk. If you would invest  5,184  in Big Bird Foods on December 23, 2024 and sell it today you would lose (134.00) from holding Big Bird Foods or give up 2.58% of portfolio value over 90 days.

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

Big Bird Foods  vs.  IBL HealthCare

Big Bird Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Bird Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Big Bird is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

IBL HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days IBL HealthCare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Big Bird and IBL HealthCare

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

The idea behind Big Bird Foods and IBL HealthCare 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.