Correlation Between ILFS Investment and Beta Drugs

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

By analyzing existing cross correlation between ILFS Investment Managers and Beta Drugs, you can compare the effects of market volatilities on ILFS Investment and Beta Drugs 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 ILFS Investment with a short position of Beta Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of ILFS Investment and Beta Drugs.

Diversification Opportunities for ILFS Investment and Beta Drugs

0.02

Correlation Coefficient

ILFS Investment  Beta Drugs

Significant diversification

The 3 months correlation between ILFS and Beta is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding ILFS Investment Managers and Beta Drugs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Drugs and ILFS Investment 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 ILFS Investment Managers are associated (or correlated) with Beta Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Drugs has no effect on the direction of ILFS Investment i.e., ILFS Investment and Beta Drugs go up and down completely randomly.

Pair Corralation between ILFS Investment and Beta Drugs

Assuming the 90 days trading horizon ILFS Investment is expected to generate 1.83 times less return on investment than Beta Drugs. But when comparing it to its historical volatility, ILFS Investment Managers is 1.02 times less risky than Beta Drugs. It trades about 0.05 of its potential returns per unit of risk. Beta Drugs is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  198,300  in Beta Drugs on September 22, 2024 and sell it today you would earn a total of  7,705  from holding Beta Drugs or generate 3.89% return on investment over 90 days.

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

ILFS Investment Managers  vs.  Beta Drugs

ILFS Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ILFS Investment Managers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ILFS Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Beta Drugs

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beta Drugs are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Beta Drugs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ILFS Investment and Beta Drugs

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

The idea behind ILFS Investment Managers and Beta Drugs 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.