Correlation Between Ibiden CoLtd and Plexus Corp

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

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

Diversification Opportunities for Ibiden CoLtd and Plexus Corp

-0.24

Correlation Coefficient

Ibiden CoLtd  Plexus Corp

Very good diversification

The 3 months correlation between Ibiden and Plexus is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ibiden CoLtd and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp and Ibiden CoLtd 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 Ibiden CoLtd are associated (or correlated) with Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Ibiden CoLtd i.e., Ibiden CoLtd and Plexus Corp go up and down completely randomly.

Pair Corralation between Ibiden CoLtd and Plexus Corp

Assuming the 90 days horizon Ibiden CoLtd is expected to under-perform the Plexus Corp. In addition to that, Ibiden CoLtd is 1.23 times more volatile than Plexus Corp. It trades about -0.03 of its total potential returns per unit of risk. Plexus Corp is currently generating about 0.19 per unit of volatility. If you would invest  11,700  in Plexus Corp on September 23, 2024 and sell it today you would earn a total of  3,500  from holding Plexus Corp or generate 29.91% return on investment over 90 days.

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

Ibiden CoLtd  vs.  Plexus Corp

Ibiden CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ibiden CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ibiden CoLtd is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Plexus Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Plexus Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ibiden CoLtd and Plexus Corp

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

The idea behind Ibiden CoLtd and Plexus Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.