Correlation Between IF Bancorp and Commerzbank

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

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

Diversification Opportunities for IF Bancorp and Commerzbank

-0.65

Correlation Coefficient

IF Bancorp  Commerzbank

Excellent diversification

The 3 months correlation between IROQ and Commerzbank is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding IF Bancorp and Commerzbank AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG PK and IF Bancorp 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 IF Bancorp are associated (or correlated) with Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG PK has no effect on the direction of IF Bancorp i.e., IF Bancorp and Commerzbank go up and down completely randomly.

Pair Corralation between IF Bancorp and Commerzbank

Given the investment horizon of 90 days IF Bancorp is expected to generate 1.51 times more return on investment than Commerzbank. However, IF Bancorp is 1.51 times more volatile than Commerzbank AG PK. It trades about 0.07 of its potential returns per unit of risk. Commerzbank AG PK is currently generating about -0.09 per unit of risk. If you would invest  2,131  in IF Bancorp on September 21, 2024 and sell it today you would earn a total of  73.00  from holding IF Bancorp or generate 3.43% return on investment over 90 days.

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

IF Bancorp  vs.  Commerzbank AG PK

IF Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Commerzbank AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commerzbank AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Commerzbank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IF Bancorp and Commerzbank

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

The idea behind IF Bancorp and Commerzbank AG PK 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 Transaction History module to view history of all your transactions and understand their impact on performance.