Correlation Between ILFS Investment and Music Broadcast

Can any of the company-specific risk be diversified away by investing in both ILFS Investment and Music Broadcast 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 Music Broadcast 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 Music Broadcast Limited, you can compare the effects of market volatilities on ILFS Investment and Music Broadcast 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 Music Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of ILFS Investment and Music Broadcast.

Diversification Opportunities for ILFS Investment and Music Broadcast

0.84

Correlation Coefficient

ILFS Investment  Music Broadcast

Very poor diversification

The 3 months correlation between ILFS and Music is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ILFS Investment Managers and Music Broadcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Music Broadcast 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 Music Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Music Broadcast has no effect on the direction of ILFS Investment i.e., ILFS Investment and Music Broadcast go up and down completely randomly.

Pair Corralation between ILFS Investment and Music Broadcast

Assuming the 90 days trading horizon ILFS Investment Managers is expected to generate 1.12 times more return on investment than Music Broadcast. However, ILFS Investment is 1.12 times more volatile than Music Broadcast Limited. It trades about -0.08 of its potential returns per unit of risk. Music Broadcast Limited is currently generating about -0.18 per unit of risk. If you would invest  1,137  in ILFS Investment Managers on November 29, 2024 and sell it today you would lose (143.00) from holding ILFS Investment Managers or give up 12.58% of portfolio value over 90 days.

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

ILFS Investment Managers  vs.  Music Broadcast Limited

ILFS Investment Managers

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Music Broadcast

Risk-Adjusted Performance

Very Weak

Over the last 90 days Music Broadcast Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with ILFS Investment and Music Broadcast

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

The idea behind ILFS Investment Managers and Music Broadcast Limited 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.