Correlation Between IAC and Outbrain

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

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

Diversification Opportunities for IAC and Outbrain

-0.54

Correlation Coefficient

IAC  Outbrain

Excellent diversification

The 3 months correlation between IAC and Outbrain is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding IAC Inc and Outbrain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outbrain and IAC 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 IAC Inc are associated (or correlated) with Outbrain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outbrain has no effect on the direction of IAC i.e., IAC and Outbrain go up and down completely randomly.

Pair Corralation between IAC and Outbrain

Considering the 90-day investment horizon IAC Inc is expected to under-perform the Outbrain. But the stock apears to be less risky and, when comparing its historical volatility, IAC Inc is 1.23 times less risky than Outbrain. The stock trades about -0.03 of its potential returns per unit of risk. The Outbrain is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  520.00  in Outbrain on September 12, 2024 and sell it today you would earn a total of  145.00  from holding Outbrain or generate 27.88% return on investment over 90 days.

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

IAC Inc  vs.  Outbrain

IAC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Outbrain

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Outbrain are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, Outbrain sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAC and Outbrain

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

The idea behind IAC Inc and Outbrain 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.