Correlation Between Independent Bank and Inter Parfums

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

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

Diversification Opportunities for Independent Bank and Inter Parfums

-0.11

Correlation Coefficient

Independent Bank  Inter Parfums

Good diversification

The 3 months correlation between Independent and Inter is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums and Independent Bank 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 Independent Bank are associated (or correlated) with Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Independent Bank i.e., Independent Bank and Inter Parfums go up and down completely randomly.

Pair Corralation between Independent Bank and Inter Parfums

Given the investment horizon of 90 days Independent Bank is expected to generate 0.82 times more return on investment than Inter Parfums. However, Independent Bank is 1.22 times less risky than Inter Parfums. It trades about -0.01 of its potential returns per unit of risk. Inter Parfums is currently generating about -0.11 per unit of risk. If you would invest  4,841  in Independent Bank on March 14, 2024 and sell it today you would lose (116.00) from holding Independent Bank or give up 2.4% of portfolio value over 90 days.

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

Independent Bank  vs.  Inter Parfums

Independent Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Independent Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Independent Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Inter Parfums

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inter Parfums has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Independent Bank and Inter Parfums

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

The idea behind Independent Bank and Inter Parfums 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.