Correlation Between Ecofibre and Ingenia Communities

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

By analyzing existing cross correlation between Ecofibre and Ingenia Communities Group, you can compare the effects of market volatilities on Ecofibre and Ingenia Communities 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 Ingenia Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofibre and Ingenia Communities.

Diversification Opportunities for Ecofibre and Ingenia Communities

-0.8

Correlation Coefficient

Ecofibre  Ingenia Communities

Pay attention - limited upside

The 3 months correlation between Ecofibre and Ingenia is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and Ingenia Communities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingenia Communities 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 Ingenia Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingenia Communities has no effect on the direction of Ecofibre i.e., Ecofibre and Ingenia Communities go up and down completely randomly.

Pair Corralation between Ecofibre and Ingenia Communities

Assuming the 90 days trading horizon Ecofibre is expected to generate 5.78 times more return on investment than Ingenia Communities. However, Ecofibre is 5.78 times more volatile than Ingenia Communities Group. It trades about 0.04 of its potential returns per unit of risk. Ingenia Communities Group is currently generating about -0.03 per unit of risk. If you would invest  3.10  in Ecofibre on September 4, 2024 and sell it today you would earn a total of  0.10  from holding Ecofibre or generate 3.23% return on investment over 90 days.

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

Ecofibre  vs.  Ingenia Communities Group

Ecofibre

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ecofibre unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ingenia Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ingenia Communities Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ingenia Communities is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecofibre and Ingenia Communities

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

The idea behind Ecofibre and Ingenia Communities Group 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..