Correlation Between IAC and Pinterest

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

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

Diversification Opportunities for IAC and Pinterest

0.51

Correlation Coefficient

IAC  Pinterest

Very weak diversification

The 3 months correlation between IAC and Pinterest is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding IAC Inc and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest and IAC 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 IAC Inc are associated (or correlated) with Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of IAC i.e., IAC and Pinterest go up and down completely randomly.

Pair Corralation between IAC and Pinterest

Considering the 90-day investment horizon IAC Inc is expected to generate 0.72 times more return on investment than Pinterest. However, IAC Inc is 1.39 times less risky than Pinterest. It trades about 0.06 of its potential returns per unit of risk. Pinterest is currently generating about 0.03 per unit of risk. If you would invest  5,260  in IAC Inc on February 8, 2024 and sell it today you would earn a total of  375.00  from holding IAC Inc or generate 7.13% return on investment over 90 days.

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

IAC Inc  vs.  Pinterest

IAC Inc

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IAC Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, IAC may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pinterest

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pinterest are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IAC and Pinterest

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

The idea behind IAC Inc and Pinterest 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.