Correlation Between Continental Beverage and IFAN Financial

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

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

Diversification Opportunities for Continental Beverage and IFAN Financial

-0.15

Correlation Coefficient

Continental Beverage  IFAN Financial

Good diversification

The 3 months correlation between Continental and IFAN is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Continental Beverage Brands and IFAN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IFAN Financial and Continental Beverage 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 Continental Beverage Brands are associated (or correlated) with IFAN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IFAN Financial has no effect on the direction of Continental Beverage i.e., Continental Beverage and IFAN Financial go up and down completely randomly.

Pair Corralation between Continental Beverage and IFAN Financial

Given the investment horizon of 90 days Continental Beverage Brands is expected to generate 2.65 times more return on investment than IFAN Financial. However, Continental Beverage is 2.65 times more volatile than IFAN Financial. It trades about 0.19 of its potential returns per unit of risk. IFAN Financial is currently generating about 0.16 per unit of risk. If you would invest  18.00  in Continental Beverage Brands on September 12, 2024 and sell it today you would earn a total of  52.00  from holding Continental Beverage Brands or generate 288.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Continental Beverage Brands  vs.  IFAN Financial

Continental Beverage

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Beverage Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Continental Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

IFAN Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IFAN Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, IFAN Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Continental Beverage and IFAN Financial

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

The idea behind Continental Beverage Brands and IFAN Financial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.