Correlation Between Generation Capital and IBI Inv

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

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

Diversification Opportunities for Generation Capital and IBI Inv

0.61

Correlation Coefficient

Generation Capital  IBI Inv

Poor diversification

The 3 months correlation between Generation and IBI is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Generation Capital and IBI Inv House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBI Inv House and Generation Capital 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 Generation Capital are associated (or correlated) with IBI Inv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBI Inv House has no effect on the direction of Generation Capital i.e., Generation Capital and IBI Inv go up and down completely randomly.

Pair Corralation between Generation Capital and IBI Inv

Assuming the 90 days trading horizon Generation Capital is expected to generate 1.8 times less return on investment than IBI Inv. But when comparing it to its historical volatility, Generation Capital is 1.21 times less risky than IBI Inv. It trades about 0.1 of its potential returns per unit of risk. IBI Inv House is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,594,000  in IBI Inv House on December 30, 2024 and sell it today you would earn a total of  328,000  from holding IBI Inv House or generate 20.58% return on investment over 90 days.

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

Generation Capital  vs.  IBI Inv House

Generation Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Generation Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Generation Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

IBI Inv House

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBI Inv House are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, IBI Inv sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Generation Capital and IBI Inv

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

The idea behind Generation Capital and IBI Inv House 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.