Correlation Between Ecofibre and Insignia Financial

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

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

Diversification Opportunities for Ecofibre and Insignia Financial

-0.5

Correlation Coefficient

Ecofibre  Insignia Financial

Very good diversification

The 3 months correlation between Ecofibre and Insignia is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and Ecofibre 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 Ecofibre are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of Ecofibre i.e., Ecofibre and Insignia Financial go up and down completely randomly.

Pair Corralation between Ecofibre and Insignia Financial

Assuming the 90 days trading horizon Ecofibre is expected to under-perform the Insignia Financial. In addition to that, Ecofibre is 2.0 times more volatile than Insignia Financial. It trades about -0.04 of its total potential returns per unit of risk. Insignia Financial is currently generating about 0.17 per unit of volatility. If you would invest  315.00  in Insignia Financial on December 2, 2024 and sell it today you would earn a total of  110.00  from holding Insignia Financial or generate 34.92% return on investment over 90 days.

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

Ecofibre  vs.  Insignia Financial

Ecofibre

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ecofibre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Insignia Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecofibre and Insignia Financial

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

The idea behind Ecofibre and Insignia 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.