Correlation Between IBI Inv and Generation Capital

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

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

Diversification Opportunities for IBI Inv and Generation Capital

0.61

Correlation Coefficient

IBI Inv  Generation Capital

Poor diversification

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

Pair Corralation between IBI Inv and Generation Capital

Assuming the 90 days trading horizon IBI Inv House is expected to generate 1.21 times more return on investment than Generation Capital. However, IBI Inv is 1.21 times more volatile than Generation Capital. It trades about 0.15 of its potential returns per unit of risk. Generation Capital is currently generating about 0.1 per unit of risk. 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

IBI Inv House  vs.  Generation Capital

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.

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.

Pair Trading with IBI Inv and Generation Capital

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

The idea behind IBI Inv House and Generation Capital 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.