Correlation Between Capital Securities and IBF Financial

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

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

Diversification Opportunities for Capital Securities and IBF Financial

0.86

Correlation Coefficient

Capital Securities  IBF Financial

Very poor diversification

The 3 months correlation between Capital and IBF is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Capital Securities Corp and IBF Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBF Financial Holdings and Capital Securities 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 Capital Securities Corp are associated (or correlated) with IBF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBF Financial Holdings has no effect on the direction of Capital Securities i.e., Capital Securities and IBF Financial go up and down completely randomly.

Pair Corralation between Capital Securities and IBF Financial

Assuming the 90 days trading horizon Capital Securities is expected to generate 1.04 times less return on investment than IBF Financial. In addition to that, Capital Securities is 1.83 times more volatile than IBF Financial Holdings. It trades about 0.1 of its total potential returns per unit of risk. IBF Financial Holdings is currently generating about 0.19 per unit of volatility. If you would invest  1,385  in IBF Financial Holdings on March 13, 2024 and sell it today you would earn a total of  170.00  from holding IBF Financial Holdings or generate 12.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.62%
Values	Daily Returns

Capital Securities Corp  vs.  IBF Financial Holdings

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.

IBF Financial Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IBF Financial Holdings are ranked lower than 15 (%) 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.

Pair Trading with Capital Securities and IBF Financial

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

The idea behind Capital Securities Corp and IBF Financial Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.