Correlation Between Canlan Ice and IB Acquisition

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

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

Diversification Opportunities for Canlan Ice and IB Acquisition

0.59

Correlation Coefficient

Canlan Ice  IB Acquisition

Very weak diversification

The 3 months correlation between Canlan and IBAC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports 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 Canlan Ice 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 Canlan Ice Sports 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 Canlan Ice i.e., Canlan Ice and IB Acquisition go up and down completely randomly.

Pair Corralation between Canlan Ice and IB Acquisition

Assuming the 90 days horizon Canlan Ice is expected to generate 2.47 times less return on investment than IB Acquisition. But when comparing it to its historical volatility, Canlan Ice Sports is 1.82 times less risky than IB Acquisition. It trades about 0.13 of its potential returns per unit of risk. IB Acquisition Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,011  in IB Acquisition Corp on December 25, 2024 and sell it today you would earn a total of  17.00  from holding IB Acquisition Corp or generate 1.68% return on investment over 90 days.

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

Canlan Ice Sports  vs.  IB Acquisition Corp

Canlan Ice Sports

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

IB Acquisition Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IB Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IB Acquisition is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Canlan Ice and IB Acquisition

The main advantage of trading using opposite Canlan Ice and IB Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canlan Ice 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 Canlan Ice Sports 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.