Correlation Between Corporate Office and IA FINANCIAL

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Can any of the company-specific risk be diversified away by investing in both Corporate Office and IA FINANCIAL 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 Corporate Office and IA FINANCIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corporate Office Properties and IA FINANCIAL P, you can compare the effects of market volatilities on Corporate Office and IA FINANCIAL 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 Corporate Office with a short position of IA FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and IA FINANCIAL.

Diversification Opportunities for Corporate Office and IA FINANCIAL

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Corporate and 1OD is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and IA FINANCIAL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA FINANCIAL P and Corporate Office 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 Corporate Office Properties are associated (or correlated) with IA FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA FINANCIAL P has no effect on the direction of Corporate Office i.e., Corporate Office and IA FINANCIAL go up and down completely randomly.

Pair Corralation between Corporate Office and IA FINANCIAL

Assuming the 90 days horizon Corporate Office is expected to generate 1.89 times less return on investment than IA FINANCIAL. But when comparing it to its historical volatility, Corporate Office Properties is 1.88 times less risky than IA FINANCIAL. It trades about 0.14 of its potential returns per unit of risk. IA FINANCIAL P is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,128  in IA FINANCIAL P on September 23, 2024 and sell it today you would earn a total of  1,472  from holding IA FINANCIAL P or generate 20.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Corporate Office Properties  vs.  IA FINANCIAL P

 Performance 
       Timeline  
Corporate Office Pro 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Office Properties are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Corporate Office may actually be approaching a critical reversion point that can send shares even higher in January 2025.
IA FINANCIAL P 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in IA FINANCIAL P are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IA FINANCIAL reported solid returns over the last few months and may actually be approaching a breakup point.

Corporate Office and IA FINANCIAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Corporate Office and IA FINANCIAL

The main advantage of trading using opposite Corporate Office and IA FINANCIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office position performs unexpectedly, IA FINANCIAL 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 IA FINANCIAL will offset losses from the drop in IA FINANCIAL's long position.
The idea behind Corporate Office Properties and IA FINANCIAL P 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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