Correlation Between IBEX and Direct Communication

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

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

Diversification Opportunities for IBEX and Direct Communication

-0.86

Correlation Coefficient

IBEX  Direct Communication

Pay attention - limited upside

The 3 months correlation between IBEX and Direct is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding IBEX and Direct Communication Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Communication and IBEX 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 IBEX are associated (or correlated) with Direct Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Communication has no effect on the direction of IBEX i.e., IBEX and Direct Communication go up and down completely randomly.

Pair Corralation between IBEX and Direct Communication

Given the investment horizon of 90 days IBEX is expected to generate 0.27 times more return on investment than Direct Communication. However, IBEX is 3.7 times less risky than Direct Communication. It trades about 0.14 of its potential returns per unit of risk. Direct Communication Solutions is currently generating about -0.19 per unit of risk. If you would invest  2,145  in IBEX on December 28, 2024 and sell it today you would earn a total of  382.00  from holding IBEX or generate 17.81% return on investment over 90 days.

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

IBEX  vs.  Direct Communication Solutions

IBEX

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBEX are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, IBEX showed solid returns over the last few months and may actually be approaching a breakup point.

Direct Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direct Communication Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IBEX and Direct Communication

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

The idea behind IBEX and Direct Communication Solutions 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.