Correlation Between IdeaForge Technology and Power Finance

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

By analyzing existing cross correlation between ideaForge Technology Limited and Power Finance, you can compare the effects of market volatilities on IdeaForge Technology and Power Finance 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 IdeaForge Technology with a short position of Power Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of IdeaForge Technology and Power Finance.

Diversification Opportunities for IdeaForge Technology and Power Finance

0.05

Correlation Coefficient

IdeaForge Technology  Power Finance

Significant diversification

The 3 months correlation between IdeaForge and Power is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ideaForge Technology Limited and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance and IdeaForge Technology 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 ideaForge Technology Limited are associated (or correlated) with Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of IdeaForge Technology i.e., IdeaForge Technology and Power Finance go up and down completely randomly.

Pair Corralation between IdeaForge Technology and Power Finance

Assuming the 90 days trading horizon ideaForge Technology Limited is expected to under-perform the Power Finance. But the stock apears to be less risky and, when comparing its historical volatility, ideaForge Technology Limited is 1.03 times less risky than Power Finance. The stock trades about -0.12 of its potential returns per unit of risk. The Power Finance is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  49,023  in Power Finance on September 27, 2024 and sell it today you would lose (3,903) from holding Power Finance or give up 7.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

ideaForge Technology Limited  vs.  Power Finance

ideaForge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ideaForge Technology Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IdeaForge Technology and Power Finance

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

The idea behind ideaForge Technology Limited and Power Finance 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.