Correlation Between BankInvest Optima and IA Invest

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

By analyzing existing cross correlation between BankInvest Optima 30 and IA Invest Advice, you can compare the effects of market volatilities on BankInvest Optima and IA Invest 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 BankInvest Optima with a short position of IA Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankInvest Optima and IA Invest.

Diversification Opportunities for BankInvest Optima and IA Invest

0.87

Correlation Coefficient

BankInvest Optima  IA Invest

Very poor diversification

The 3 months correlation between BankInvest and IAIACVF is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Optima 30 and IA Invest Advice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Invest Advice and BankInvest Optima 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 BankInvest Optima 30 are associated (or correlated) with IA Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Invest Advice has no effect on the direction of BankInvest Optima i.e., BankInvest Optima and IA Invest go up and down completely randomly.

Pair Corralation between BankInvest Optima and IA Invest

Assuming the 90 days trading horizon BankInvest Optima is expected to generate 3.02 times less return on investment than IA Invest. But when comparing it to its historical volatility, BankInvest Optima 30 is 2.32 times less risky than IA Invest. It trades about 0.08 of its potential returns per unit of risk. IA Invest Advice is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,035  in IA Invest Advice on September 23, 2024 and sell it today you would earn a total of  1,643  from holding IA Invest Advice or generate 13.65% return on investment over 90 days.

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

BankInvest Optima 30  vs.  IA Invest Advice

BankInvest Optima

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

IA Invest Advice

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IA Invest Advice are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IA Invest may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BankInvest Optima and IA Invest

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

The idea behind BankInvest Optima 30 and IA Invest Advice 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..