Correlation Between IBI Inv and Lapidoth

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

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

Diversification Opportunities for IBI Inv and Lapidoth

0.9

Correlation Coefficient

IBI Inv  Lapidoth

Almost no diversification

The 3 months correlation between IBI and Lapidoth is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding IBI Inv House and Lapidoth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lapidoth and IBI Inv 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 IBI Inv House are associated (or correlated) with Lapidoth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lapidoth has no effect on the direction of IBI Inv i.e., IBI Inv and Lapidoth go up and down completely randomly.

Pair Corralation between IBI Inv and Lapidoth

Assuming the 90 days trading horizon IBI Inv is expected to generate 1.29 times less return on investment than Lapidoth. But when comparing it to its historical volatility, IBI Inv House is 1.19 times less risky than Lapidoth. It trades about 0.23 of its potential returns per unit of risk. Lapidoth is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  515,253  in Lapidoth on September 23, 2024 and sell it today you would earn a total of  153,447  from holding Lapidoth or generate 29.78% return on investment over 90 days.

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

IBI Inv House  vs.  Lapidoth

IBI Inv House

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IBI Inv House are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, IBI Inv sustained solid returns over the last few months and may actually be approaching a breakup point.

Lapidoth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lapidoth are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lapidoth sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBI Inv and Lapidoth

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

The idea behind IBI Inv House and Lapidoth 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.