Correlation Between IBI Inv and Oil Refineries

Can any of the company-specific risk be diversified away by investing in both IBI Inv and Oil Refineries 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 Oil Refineries 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 Oil Refineries, you can compare the effects of market volatilities on IBI Inv and Oil Refineries 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 Oil Refineries. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBI Inv and Oil Refineries.

Diversification Opportunities for IBI Inv and Oil Refineries

0.41

Correlation Coefficient

IBI Inv  Oil Refineries

Very weak diversification

The 3 months correlation between IBI and Oil is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding IBI Inv House and Oil Refineries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Refineries 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 Oil Refineries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Refineries has no effect on the direction of IBI Inv i.e., IBI Inv and Oil Refineries go up and down completely randomly.

Pair Corralation between IBI Inv and Oil Refineries

Assuming the 90 days trading horizon IBI Inv House is expected to generate 1.05 times more return on investment than Oil Refineries. However, IBI Inv is 1.05 times more volatile than Oil Refineries. It trades about 0.27 of its potential returns per unit of risk. Oil Refineries is currently generating about 0.07 per unit of risk. If you would invest  1,232,564  in IBI Inv House on September 25, 2024 and sell it today you would earn a total of  348,436  from holding IBI Inv House or generate 28.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.83%
Values	Daily Returns

IBI Inv House  vs.  Oil Refineries

IBI Inv House

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IBI Inv House are ranked lower than 21 (%) 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.

Oil Refineries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Refineries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Oil Refineries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IBI Inv and Oil Refineries

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

The idea behind IBI Inv House and Oil Refineries 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.