Correlation Between Bri Chem and Imaflex

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

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

Diversification Opportunities for Bri Chem and Imaflex

0.05

Correlation Coefficient

Bri Chem  Imaflex

Significant diversification

The 3 months correlation between Bri and Imaflex is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and Imaflex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imaflex and Bri Chem 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 Bri Chem Corp are associated (or correlated) with Imaflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imaflex has no effect on the direction of Bri Chem i.e., Bri Chem and Imaflex go up and down completely randomly.

Pair Corralation between Bri Chem and Imaflex

Assuming the 90 days trading horizon Bri Chem is expected to generate 2.25 times less return on investment than Imaflex. In addition to that, Bri Chem is 1.87 times more volatile than Imaflex. It trades about 0.02 of its total potential returns per unit of risk. Imaflex is currently generating about 0.1 per unit of volatility. If you would invest  108.00  in Imaflex on September 5, 2024 and sell it today you would earn a total of  32.00  from holding Imaflex or generate 29.63% return on investment over 90 days.

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

Bri Chem Corp  vs.  Imaflex

Bri Chem Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bri Chem may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Imaflex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imaflex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Imaflex is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bri Chem and Imaflex

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

The idea behind Bri Chem Corp and Imaflex 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.