Correlation Between Wex and I3 Verticals

Can any of the company-specific risk be diversified away by investing in both Wex and I3 Verticals 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 Wex and I3 Verticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wex Inc and i3 Verticals, you can compare the effects of market volatilities on Wex and I3 Verticals 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 Wex with a short position of I3 Verticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wex and I3 Verticals.

Diversification Opportunities for Wex and I3 Verticals

-0.67

Correlation Coefficient

Wex  I3 Verticals

Excellent diversification

The 3 months correlation between Wex and IIIV is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Wex Inc and i3 Verticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i3 Verticals and Wex 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 Wex Inc are associated (or correlated) with I3 Verticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i3 Verticals has no effect on the direction of Wex i.e., Wex and I3 Verticals go up and down completely randomly.

Pair Corralation between Wex and I3 Verticals

Considering the 90-day investment horizon Wex Inc is expected to under-perform the I3 Verticals. In addition to that, Wex is 1.32 times more volatile than i3 Verticals. It trades about -0.09 of its total potential returns per unit of risk. i3 Verticals is currently generating about 0.05 per unit of volatility. If you would invest  2,480  in i3 Verticals on November 28, 2024 and sell it today you would earn a total of  143.00  from holding i3 Verticals or generate 5.77% return on investment over 90 days.

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

Wex Inc  vs.  i3 Verticals

Wex Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wex Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

i3 Verticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in i3 Verticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, I3 Verticals may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Wex and I3 Verticals

The main advantage of trading using opposite Wex and I3 Verticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wex position performs unexpectedly, I3 Verticals 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 I3 Verticals will offset losses from the drop in I3 Verticals' long position.

The idea behind Wex Inc and i3 Verticals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.