Correlation Between Income Opportunity and IF Bancorp

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

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

Diversification Opportunities for Income Opportunity and IF Bancorp

-0.14

Correlation Coefficient

Income Opportunity  IF Bancorp

Good diversification

The 3 months correlation between Income and IROQ is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Income Opportunity Realty and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF Bancorp and Income Opportunity 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 Income Opportunity Realty are associated (or correlated) with IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of Income Opportunity i.e., Income Opportunity and IF Bancorp go up and down completely randomly.

Pair Corralation between Income Opportunity and IF Bancorp

Considering the 90-day investment horizon Income Opportunity Realty is expected to under-perform the IF Bancorp. In addition to that, Income Opportunity is 1.54 times more volatile than IF Bancorp. It trades about -0.03 of its total potential returns per unit of risk. IF Bancorp is currently generating about 0.03 per unit of volatility. If you would invest  2,306  in IF Bancorp on December 26, 2024 and sell it today you would earn a total of  52.00  from holding IF Bancorp or generate 2.25% return on investment over 90 days.

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

Income Opportunity Realty  vs.  IF Bancorp

Income Opportunity Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Income Opportunity Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Income Opportunity is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

IF Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IF Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Income Opportunity and IF Bancorp

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

The idea behind Income Opportunity Realty and IF Bancorp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.