Correlation Between IAR SA and Comvex SA

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

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

Diversification Opportunities for IAR SA and Comvex SA

-0.07

Correlation Coefficient

IAR SA  Comvex SA

Good diversification

The 3 months correlation between IAR and Comvex is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding IAR SA and Comvex SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comvex SA and IAR SA 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 IAR SA are associated (or correlated) with Comvex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comvex SA has no effect on the direction of IAR SA i.e., IAR SA and Comvex SA go up and down completely randomly.

Pair Corralation between IAR SA and Comvex SA

Assuming the 90 days trading horizon IAR SA is expected to under-perform the Comvex SA. But the stock apears to be less risky and, when comparing its historical volatility, IAR SA is 2.56 times less risky than Comvex SA. The stock trades about -0.05 of its potential returns per unit of risk. The Comvex SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,900  in Comvex SA on October 25, 2024 and sell it today you would earn a total of  900.00  from holding Comvex SA or generate 11.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

IAR SA  vs.  Comvex SA

IAR SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Comvex SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Comvex SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Comvex SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAR SA and Comvex SA

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

The idea behind IAR SA and Comvex SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.