Correlation Between Opera and IAC

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

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

Diversification Opportunities for Opera and IAC

-0.6

Correlation Coefficient

Opera  IAC

Excellent diversification

The 3 months correlation between Opera and IAC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Opera and IAC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAC Inc and Opera 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 Opera are associated (or correlated) with IAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAC Inc has no effect on the direction of Opera i.e., Opera and IAC go up and down completely randomly.

Pair Corralation between Opera and IAC

Given the investment horizon of 90 days Opera is expected to generate 1.09 times more return on investment than IAC. However, Opera is 1.09 times more volatile than IAC Inc. It trades about 0.2 of its potential returns per unit of risk. IAC Inc is currently generating about -0.05 per unit of risk. If you would invest  1,442  in Opera on August 31, 2024 and sell it today you would earn a total of  517.00  from holding Opera or generate 35.85% return on investment over 90 days.

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

Opera  vs.  IAC Inc

Opera

Risk-Adjusted Performance

16 of 100

Solid

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

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.

Pair Trading with Opera and IAC

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

The idea behind Opera and IAC Inc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.