Correlation Between Settlebank and Incar Financial

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

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

Diversification Opportunities for Settlebank and Incar Financial

-0.78

Correlation Coefficient

Settlebank  Incar Financial

Pay attention - limited upside

The 3 months correlation between Settlebank and Incar is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and Incar Financial Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incar Financial Service and Settlebank 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 Settlebank are associated (or correlated) with Incar Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incar Financial Service has no effect on the direction of Settlebank i.e., Settlebank and Incar Financial go up and down completely randomly.

Pair Corralation between Settlebank and Incar Financial

Assuming the 90 days trading horizon Settlebank is expected to under-perform the Incar Financial. But the stock apears to be less risky and, when comparing its historical volatility, Settlebank is 1.29 times less risky than Incar Financial. The stock trades about -0.11 of its potential returns per unit of risk. The Incar Financial Service is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  464,000  in Incar Financial Service on September 2, 2024 and sell it today you would earn a total of  179,000  from holding Incar Financial Service or generate 38.58% return on investment over 90 days.

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

Settlebank  vs.  Incar Financial Service

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank 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.

Incar Financial Service

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Incar Financial Service are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Incar Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Settlebank and Incar Financial

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

The idea behind Settlebank and Incar Financial Service 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.