Correlation Between CVR Energy and InBankshares Corp

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

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

Diversification Opportunities for CVR Energy and InBankshares Corp

0.78

Correlation Coefficient

CVR Energy  InBankshares Corp

Poor diversification

The 3 months correlation between CVR and InBankshares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and InBankshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InBankshares Corp and CVR Energy 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 CVR Energy are associated (or correlated) with InBankshares Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InBankshares Corp has no effect on the direction of CVR Energy i.e., CVR Energy and InBankshares Corp go up and down completely randomly.

Pair Corralation between CVR Energy and InBankshares Corp

Considering the 90-day investment horizon CVR Energy is expected to generate 5.4 times more return on investment than InBankshares Corp. However, CVR Energy is 5.4 times more volatile than InBankshares Corp. It trades about 0.28 of its potential returns per unit of risk. InBankshares Corp is currently generating about 0.27 per unit of risk. If you would invest  1,644  in CVR Energy on September 4, 2024 and sell it today you would earn a total of  324.00  from holding CVR Energy or generate 19.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

CVR Energy  vs.  InBankshares Corp

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

InBankshares Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InBankshares Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, InBankshares Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CVR Energy and InBankshares Corp

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

The idea behind CVR Energy and InBankshares Corp 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.