Correlation Between IG Petrochemicals and Computer Age

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Can any of the company-specific risk be diversified away by investing in both IG Petrochemicals and Computer Age 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 IG Petrochemicals and Computer Age into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IG Petrochemicals Limited and Computer Age Management, you can compare the effects of market volatilities on IG Petrochemicals and Computer Age 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 IG Petrochemicals with a short position of Computer Age. Check out your portfolio center. Please also check ongoing floating volatility patterns of IG Petrochemicals and Computer Age.

Diversification Opportunities for IG Petrochemicals and Computer Age

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between IGPL and Computer is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding IG Petrochemicals Limited and Computer Age Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Age Management and IG Petrochemicals 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 IG Petrochemicals Limited are associated (or correlated) with Computer Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Age Management has no effect on the direction of IG Petrochemicals i.e., IG Petrochemicals and Computer Age go up and down completely randomly.

Pair Corralation between IG Petrochemicals and Computer Age

Assuming the 90 days trading horizon IG Petrochemicals Limited is expected to under-perform the Computer Age. In addition to that, IG Petrochemicals is 1.34 times more volatile than Computer Age Management. It trades about -0.26 of its total potential returns per unit of risk. Computer Age Management is currently generating about -0.22 per unit of volatility. If you would invest  526,950  in Computer Age Management on October 10, 2024 and sell it today you would lose (39,070) from holding Computer Age Management or give up 7.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

IG Petrochemicals Limited  vs.  Computer Age Management

 Performance 
       Timeline  
IG Petrochemicals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days IG Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Computer Age Management 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in February 2025.

IG Petrochemicals and Computer Age Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IG Petrochemicals and Computer Age

The main advantage of trading using opposite IG Petrochemicals and Computer Age positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IG Petrochemicals position performs unexpectedly, Computer Age 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 Computer Age will offset losses from the drop in Computer Age's long position.
The idea behind IG Petrochemicals Limited and Computer Age Management 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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