Correlation Between Imperial Brands and MIND CTI

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

By analyzing existing cross correlation between Imperial Brands PLC and MIND CTI, you can compare the effects of market volatilities on Imperial Brands and MIND CTI 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 Imperial Brands with a short position of MIND CTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and MIND CTI.

Diversification Opportunities for Imperial Brands and MIND CTI

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Correlation Coefficient

Imperial Brands MIND CTI

Pay attention - limited upside

The 3 months correlation between Imperial and MIND CTI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and MIND CTI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIND CTI and Imperial Brands 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 Imperial Brands PLC are associated (or correlated) with MIND CTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIND CTI has no effect on the direction of Imperial Brands i.e., Imperial Brands and MIND CTI go up and down completely randomly.

Pair Corralation between Imperial Brands and MIND CTI

Assuming the 90 days horizon Imperial Brands PLC is expected to generate 0.74 times more return on investment than MIND CTI. However, Imperial Brands PLC is 1.34 times less risky than MIND CTI. It trades about 0.04 of its potential returns per unit of risk. MIND CTI is currently generating about -0.01 per unit of risk. If you would invest  1,804  in Imperial Brands PLC on December 23, 2022 and sell it today you would earn a total of  539.00  from holding Imperial Brands PLC or generate 29.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Imperial Brands PLC  vs.  MIND CTI

Imperial Brands PLC

Imperial Performance

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Over the last 90 days Imperial Brands PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Imperial Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MIND CTI

MIND CTI Performance

3 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in MIND CTI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, MIND CTI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the insiders.

Pair Trading with Imperial Brands and MIND CTI

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

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The idea behind Imperial Brands PLC and MIND CTI 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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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.