Correlation Between Geodrill and IFabric Corp

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

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

Diversification Opportunities for Geodrill and IFabric Corp

0.33

Correlation Coefficient

Geodrill  IFabric Corp

Weak diversification

The 3 months correlation between Geodrill and IFabric is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and iFabric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iFabric Corp and Geodrill 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 Geodrill Limited are associated (or correlated) with IFabric Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iFabric Corp has no effect on the direction of Geodrill i.e., Geodrill and IFabric Corp go up and down completely randomly.

Pair Corralation between Geodrill and IFabric Corp

Assuming the 90 days trading horizon Geodrill Limited is expected to under-perform the IFabric Corp. But the stock apears to be less risky and, when comparing its historical volatility, Geodrill Limited is 1.83 times less risky than IFabric Corp. The stock trades about -0.02 of its potential returns per unit of risk. The iFabric Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  105.00  in iFabric Corp on December 30, 2024 and sell it today you would earn a total of  11.00  from holding iFabric Corp or generate 10.48% return on investment over 90 days.

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

Geodrill Limited  vs.  iFabric Corp

Geodrill Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Geodrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Geodrill is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

iFabric Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iFabric Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IFabric Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geodrill and IFabric Corp

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

The idea behind Geodrill Limited and iFabric 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.