Correlation Between Direct Communication and IBEX

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

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

Diversification Opportunities for Direct Communication and IBEX

-0.49

Correlation Coefficient

Direct Communication  IBEX

Very good diversification

The 3 months correlation between Direct and IBEX is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Direct Communication Solutions and IBEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBEX and Direct Communication 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 Direct Communication Solutions are associated (or correlated) with IBEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBEX has no effect on the direction of Direct Communication i.e., Direct Communication and IBEX go up and down completely randomly.

Pair Corralation between Direct Communication and IBEX

Given the investment horizon of 90 days Direct Communication Solutions is expected to under-perform the IBEX. In addition to that, Direct Communication is 1.55 times more volatile than IBEX. It trades about -0.02 of its total potential returns per unit of risk. IBEX is currently generating about 0.11 per unit of volatility. If you would invest  1,727  in IBEX on September 1, 2024 and sell it today you would earn a total of  323.00  from holding IBEX or generate 18.7% return on investment over 90 days.

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

Direct Communication Solutions  vs.  IBEX

Direct Communication

Risk-Adjusted Performance

0 of 100

Very Weak

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

IBEX

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IBEX are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, IBEX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direct Communication and IBEX

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

The idea behind Direct Communication Solutions and IBEX 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.