Correlation Between IBC Advanced and Bri Chem

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

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

Diversification Opportunities for IBC Advanced and Bri Chem

0.02

Correlation Coefficient

IBC Advanced  Bri Chem

Significant diversification

The 3 months correlation between IBC and Bri is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding IBC Advanced Alloys and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp and IBC Advanced 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 IBC Advanced Alloys are associated (or correlated) with Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of IBC Advanced i.e., IBC Advanced and Bri Chem go up and down completely randomly.

Pair Corralation between IBC Advanced and Bri Chem

Given the investment horizon of 90 days IBC Advanced Alloys is expected to generate 2.15 times more return on investment than Bri Chem. However, IBC Advanced is 2.15 times more volatile than Bri Chem Corp. It trades about 0.1 of its potential returns per unit of risk. Bri Chem Corp is currently generating about -0.19 per unit of risk. If you would invest  7.00  in IBC Advanced Alloys on February 27, 2024 and sell it today you would earn a total of  2.50  from holding IBC Advanced Alloys or generate 35.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

IBC Advanced Alloys  vs.  Bri Chem Corp

IBC Advanced Alloys

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IBC Advanced Alloys are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, IBC Advanced showed solid returns over the last few months and may actually be approaching a breakup point.

Bri Chem Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bri Chem Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with IBC Advanced and Bri Chem

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

The idea behind IBC Advanced Alloys and Bri Chem 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.