Correlation Between Associated British and Intermediate Capital
Can any of the company-specific risk be diversified away by investing in both Associated British and Intermediate Capital 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 Associated British and Intermediate Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Intermediate Capital Group, you can compare the effects of market volatilities on Associated British and Intermediate Capital 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 Associated British with a short position of Intermediate Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Intermediate Capital.
Diversification Opportunities for Associated British and Intermediate Capital
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Associated and Intermediate is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Intermediate Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Capital and Associated British 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 Associated British Foods are associated (or correlated) with Intermediate Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Capital has no effect on the direction of Associated British i.e., Associated British and Intermediate Capital go up and down completely randomly.
Pair Corralation between Associated British and Intermediate Capital
Assuming the 90 days trading horizon Associated British is expected to generate 2.25 times less return on investment than Intermediate Capital. But when comparing it to its historical volatility, Associated British Foods is 1.37 times less risky than Intermediate Capital. It trades about 0.04 of its potential returns per unit of risk. Intermediate Capital Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 137,671 in Intermediate Capital Group on September 2, 2024 and sell it today you would earn a total of 74,129 from holding Intermediate Capital Group or generate 53.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Intermediate Capital Group
Performance |
| Timeline |
| Associated British Foods |
| Intermediate Capital |
Associated British and Intermediate Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Intermediate Capital
The main advantage of trading using opposite Associated British and Intermediate Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Intermediate Capital 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 Intermediate Capital will offset losses from the drop in Intermediate Capital's long position.| Associated British vs. Vitec Software Group | Associated British vs. Kinnevik Investment AB | Associated British vs. Kaufman Et Broad | Associated British vs. Tatton Asset Management |
| Intermediate Capital vs. Scandinavian Tobacco Group | Intermediate Capital vs. Southern Copper Corp | Intermediate Capital vs. Trainline Plc | Intermediate Capital vs. Bisichi Mining PLC |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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