Correlation Between IBI Mutual and Aerodrome

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

By analyzing existing cross correlation between IBI Mutual Funds and Aerodrome Group, you can compare the effects of market volatilities on IBI Mutual and Aerodrome 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 IBI Mutual with a short position of Aerodrome. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBI Mutual and Aerodrome.

Diversification Opportunities for IBI Mutual and Aerodrome

0.54

Correlation Coefficient

IBI Mutual  Aerodrome

Very weak diversification

The 3 months correlation between IBI and Aerodrome is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding IBI Mutual Funds and Aerodrome Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerodrome Group and IBI Mutual 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 IBI Mutual Funds are associated (or correlated) with Aerodrome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerodrome Group has no effect on the direction of IBI Mutual i.e., IBI Mutual and Aerodrome go up and down completely randomly.

Pair Corralation between IBI Mutual and Aerodrome

Assuming the 90 days trading horizon IBI Mutual is expected to generate 24.8 times less return on investment than Aerodrome. But when comparing it to its historical volatility, IBI Mutual Funds is 4.35 times less risky than Aerodrome. It trades about 0.02 of its potential returns per unit of risk. Aerodrome Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,550  in Aerodrome Group on February 15, 2024 and sell it today you would earn a total of  7,050  from holding Aerodrome Group or generate 198.59% return on investment over 90 days.

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

IBI Mutual Funds  vs.  Aerodrome Group

IBI Mutual Funds

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IBI Mutual Funds are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, IBI Mutual sustained solid returns over the last few months and may actually be approaching a breakup point.

Aerodrome Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aerodrome Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerodrome sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBI Mutual and Aerodrome

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

The idea behind IBI Mutual Funds and Aerodrome Group 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.