Correlation Between First and Ibstock PLC

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

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

Diversification Opportunities for First and Ibstock PLC

-0.38

Correlation Coefficient

First  Ibstock PLC

Very good diversification

The 3 months correlation between First and Ibstock is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Ibstock PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ibstock PLC and First 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 First Class Metals are associated (or correlated) with Ibstock PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ibstock PLC has no effect on the direction of First i.e., First and Ibstock PLC go up and down completely randomly.

Pair Corralation between First and Ibstock PLC

Assuming the 90 days trading horizon First Class Metals is expected to under-perform the Ibstock PLC. In addition to that, First is 2.67 times more volatile than Ibstock PLC. It trades about -0.05 of its total potential returns per unit of risk. Ibstock PLC is currently generating about -0.02 per unit of volatility. If you would invest  17,900  in Ibstock PLC on December 24, 2024 and sell it today you would lose (780.00) from holding Ibstock PLC or give up 4.36% of portfolio value over 90 days.

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

First Class Metals  vs.  Ibstock PLC

First Class Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Class Metals 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ibstock PLC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with First and Ibstock PLC

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

The idea behind First Class Metals and Ibstock PLC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.