Correlation Between 1st Source and IF Bancorp

Can any of the company-specific risk be diversified away by investing in both 1st Source and IF Bancorp 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 1st Source and IF Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st Source and IF Bancorp, you can compare the effects of market volatilities on 1st Source and IF Bancorp 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 1st Source with a short position of IF Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Source and IF Bancorp.

Diversification Opportunities for 1st Source and IF Bancorp

0.58

Correlation Coefficient

1st Source  IF Bancorp

Very weak diversification

The 3 months correlation between 1st and IROQ is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding 1st Source and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF Bancorp and 1st Source 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 1st Source are associated (or correlated) with IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of 1st Source i.e., 1st Source and IF Bancorp go up and down completely randomly.

Pair Corralation between 1st Source and IF Bancorp

Given the investment horizon of 90 days 1st Source is expected to generate 1.54 times less return on investment than IF Bancorp. But when comparing it to its historical volatility, 1st Source is 1.13 times less risky than IF Bancorp. It trades about 0.04 of its potential returns per unit of risk. IF Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,622  in IF Bancorp on September 5, 2024 and sell it today you would earn a total of  717.00  from holding IF Bancorp or generate 44.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.53%
Values	Daily Returns

1st Source  vs.  IF Bancorp

1st Source

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 1st Source are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, 1st Source may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IF Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1st Source and IF Bancorp

The main advantage of trading using opposite 1st Source and IF Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st Source position performs unexpectedly, IF Bancorp 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 IF Bancorp will offset losses from the drop in IF Bancorp's long position.

The idea behind 1st Source and IF Bancorp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.