Correlation Between Worthington Steel and IB Acquisition

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

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

Diversification Opportunities for Worthington Steel and IB Acquisition

0.07

Correlation Coefficient

Worthington Steel  IB Acquisition

Significant diversification

The 3 months correlation between Worthington and IBACR is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Worthington Steel and IB Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IB Acquisition Corp and Worthington Steel 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 Worthington Steel are associated (or correlated) with IB Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IB Acquisition Corp has no effect on the direction of Worthington Steel i.e., Worthington Steel and IB Acquisition go up and down completely randomly.

Pair Corralation between Worthington Steel and IB Acquisition

Allowing for the 90-day total investment horizon Worthington Steel is expected to under-perform the IB Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Worthington Steel is 2.8 times less risky than IB Acquisition. The stock trades about -0.43 of its potential returns per unit of risk. The IB Acquisition Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6.50  in IB Acquisition Corp on October 10, 2024 and sell it today you would lose (0.50) from holding IB Acquisition Corp or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.0%
Values	Daily Returns

Worthington Steel  vs.  IB Acquisition Corp

Worthington Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

IB Acquisition Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IB Acquisition Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, IB Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Worthington Steel and IB Acquisition

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

The idea behind Worthington Steel and IB Acquisition Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.