Correlation Between IBF Financial and Capital Securities

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

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

Diversification Opportunities for IBF Financial and Capital Securities

0.9

Correlation Coefficient

IBF Financial  Capital Securities

Almost no diversification

The 3 months correlation between IBF and Capital is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and Capital Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Securities Corp and IBF Financial 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 IBF Financial Holdings are associated (or correlated) with Capital Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Securities Corp has no effect on the direction of IBF Financial i.e., IBF Financial and Capital Securities go up and down completely randomly.

Pair Corralation between IBF Financial and Capital Securities

Assuming the 90 days trading horizon IBF Financial Holdings is expected to generate 0.58 times more return on investment than Capital Securities. However, IBF Financial Holdings is 1.73 times less risky than Capital Securities. It trades about -0.13 of its potential returns per unit of risk. Capital Securities Corp is currently generating about -0.25 per unit of risk. If you would invest  1,550  in IBF Financial Holdings on March 7, 2024 and sell it today you would lose (65.00) from holding IBF Financial Holdings or give up 4.19% of portfolio value over 90 days.

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

IBF Financial Holdings  vs.  Capital Securities Corp

IBF Financial Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBF Financial Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IBF Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Capital Securities Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Securities Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capital Securities showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBF Financial and Capital Securities

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

The idea behind IBF Financial Holdings and Capital Securities 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.