Correlation Between IM CoLtd and BH

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

By analyzing existing cross correlation between IM CoLtd and BH Co, you can compare the effects of market volatilities on IM CoLtd and BH 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 IM CoLtd with a short position of BH. Check out your portfolio center. Please also check ongoing floating volatility patterns of IM CoLtd and BH.

Diversification Opportunities for IM CoLtd and BH

0.22

Correlation Coefficient

IM CoLtd  BH

Modest diversification

The 3 months correlation between 101390 and BH is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding IM CoLtd and BH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Co and IM CoLtd 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 IM CoLtd are associated (or correlated) with BH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Co has no effect on the direction of IM CoLtd i.e., IM CoLtd and BH go up and down completely randomly.

Pair Corralation between IM CoLtd and BH

Assuming the 90 days trading horizon IM CoLtd is expected to generate 1.72 times more return on investment than BH. However, IM CoLtd is 1.72 times more volatile than BH Co. It trades about -0.02 of its potential returns per unit of risk. BH Co is currently generating about -0.13 per unit of risk. If you would invest  305,000  in IM CoLtd on September 3, 2024 and sell it today you would lose (40,500) from holding IM CoLtd or give up 13.28% of portfolio value over 90 days.

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

IM CoLtd  vs.  BH Co

IM CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IM CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BH Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BH Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IM CoLtd and BH

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

The idea behind IM CoLtd and BH Co 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.