Correlation Between Imperial Brands and Ion Beam
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and Ion Beam 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 Imperial Brands and Ion Beam into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Brands PLC and Ion Beam Applications, you can compare the effects of market volatilities on Imperial Brands and Ion Beam 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 Imperial Brands with a short position of Ion Beam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and Ion Beam.
Diversification Opportunities for Imperial Brands and Ion Beam
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Imperial and Ion is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and Ion Beam Applications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ion Beam Applications and Imperial Brands 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 Imperial Brands PLC are associated (or correlated) with Ion Beam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ion Beam Applications has no effect on the direction of Imperial Brands i.e., Imperial Brands and Ion Beam go up and down completely randomly.
Pair Corralation between Imperial Brands and Ion Beam
Assuming the 90 days trading horizon Imperial Brands is expected to generate 1.34 times less return on investment than Ion Beam. But when comparing it to its historical volatility, Imperial Brands PLC is 2.89 times less risky than Ion Beam. It trades about 0.26 of its potential returns per unit of risk. Ion Beam Applications is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,120 in Ion Beam Applications on September 2, 2024 and sell it today you would earn a total of 276.00 from holding Ion Beam Applications or generate 24.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Brands PLC vs. Ion Beam Applications
Performance |
| Timeline |
| Imperial Brands PLC |
| Ion Beam Applications |
Imperial Brands and Ion Beam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and Ion Beam
The main advantage of trading using opposite Imperial Brands and Ion Beam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, Ion Beam 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 Ion Beam will offset losses from the drop in Ion Beam's long position.| Imperial Brands vs. Dentsply Sirona | Imperial Brands vs. Impax Environmental Markets | Imperial Brands vs. Induction Healthcare Group | Imperial Brands vs. JLEN Environmental Assets |
| Ion Beam vs. Uniper SE | Ion Beam vs. Mulberry Group PLC | Ion Beam vs. London Security Plc | Ion Beam vs. Triad Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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