Correlation Between Decred and IOC

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

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

Diversification Opportunities for Decred and IOC

0.82

Correlation Coefficient

Decred  IOC

Very poor diversification

The 3 months correlation between Decred and IOC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Decred and IOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IOC and Decred 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 Decred are associated (or correlated) with IOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IOC has no effect on the direction of Decred i.e., Decred and IOC go up and down completely randomly.

Pair Corralation between Decred and IOC

Assuming the 90 days trading horizon Decred is expected to generate 1.22 times less return on investment than IOC. In addition to that, Decred is 1.07 times more volatile than IOC. It trades about 0.19 of its total potential returns per unit of risk. IOC is currently generating about 0.25 per unit of volatility. If you would invest  0.75  in IOC on September 1, 2024 and sell it today you would earn a total of  0.50  from holding IOC or generate 67.27% return on investment over 90 days.

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

Decred  vs.  IOC

Decred

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Decred are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Decred exhibited solid returns over the last few months and may actually be approaching a breakup point.

IOC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IOC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, IOC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Decred and IOC

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

The idea behind Decred and IOC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.