Correlation Between Diligent Media and Interarch Building

Can any of the company-specific risk be diversified away by investing in both Diligent Media and Interarch Building 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 Diligent Media and Interarch Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diligent Media and Interarch Building Products, you can compare the effects of market volatilities on Diligent Media and Interarch Building 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 Diligent Media with a short position of Interarch Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diligent Media and Interarch Building.

Diversification Opportunities for Diligent Media and Interarch Building

0.63

Correlation Coefficient

Diligent Media  Interarch Building

Poor diversification

The 3 months correlation between Diligent and Interarch is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Diligent Media and Interarch Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interarch Building and Diligent Media 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 Diligent Media are associated (or correlated) with Interarch Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interarch Building has no effect on the direction of Diligent Media i.e., Diligent Media and Interarch Building go up and down completely randomly.

Pair Corralation between Diligent Media and Interarch Building

Assuming the 90 days trading horizon Diligent Media is expected to under-perform the Interarch Building. In addition to that, Diligent Media is 1.36 times more volatile than Interarch Building Products. It trades about -0.08 of its total potential returns per unit of risk. Interarch Building Products is currently generating about -0.06 per unit of volatility. If you would invest  174,655  in Interarch Building Products on December 29, 2024 and sell it today you would lose (25,800) from holding Interarch Building Products or give up 14.77% of portfolio value over 90 days.

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

Diligent Media  vs.  Interarch Building Products

Diligent Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diligent Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Interarch Building

Risk-Adjusted Performance

Very Weak

Over the last 90 days Interarch Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Diligent Media and Interarch Building

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

The idea behind Diligent Media and Interarch Building Products 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.