Correlation Between Ridley and Infomedia

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

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

Diversification Opportunities for Ridley and Infomedia

0.52

Correlation Coefficient

Ridley  Infomedia

Very weak diversification

The 3 months correlation between Ridley and Infomedia is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ridley and Infomedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infomedia and Ridley 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 Ridley are associated (or correlated) with Infomedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infomedia has no effect on the direction of Ridley i.e., Ridley and Infomedia go up and down completely randomly.

Pair Corralation between Ridley and Infomedia

Assuming the 90 days trading horizon Ridley is expected to generate 0.69 times more return on investment than Infomedia. However, Ridley is 1.45 times less risky than Infomedia. It trades about -0.02 of its potential returns per unit of risk. Infomedia is currently generating about -0.02 per unit of risk. If you would invest  268.00  in Ridley on December 30, 2024 and sell it today you would lose (7.00) from holding Ridley or give up 2.61% of portfolio value over 90 days.

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

Ridley  vs.  Infomedia

Ridley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ridley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Ridley is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Infomedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infomedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Infomedia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ridley and Infomedia

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

The idea behind Ridley and Infomedia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.