Correlation Between IMC SA and New Tech

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

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

Diversification Opportunities for IMC SA and New Tech

0.57

Correlation Coefficient

IMC SA  New Tech

Very weak diversification

The 3 months correlation between IMC and New is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding IMC SA and New Tech Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Tech Venture and IMC 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 IMC SA are associated (or correlated) with New Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Tech Venture has no effect on the direction of IMC SA i.e., IMC SA and New Tech go up and down completely randomly.

Pair Corralation between IMC SA and New Tech

Assuming the 90 days trading horizon IMC SA is expected to generate 0.64 times more return on investment than New Tech. However, IMC SA is 1.57 times less risky than New Tech. It trades about 0.27 of its potential returns per unit of risk. New Tech Venture is currently generating about 0.1 per unit of risk. If you would invest  1,325  in IMC SA on December 2, 2024 and sell it today you would earn a total of  1,645  from holding IMC SA or generate 124.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

IMC SA  vs.  New Tech Venture

IMC SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMC SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IMC SA reported solid returns over the last few months and may actually be approaching a breakup point.

New Tech Venture

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Tech Venture are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, New Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IMC SA and New Tech

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

The idea behind IMC SA and New Tech Venture 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.