Correlation Between IAC and Gaia

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

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

Diversification Opportunities for IAC and Gaia

-0.47

Correlation Coefficient

IAC  Gaia

Very good diversification

The 3 months correlation between IAC and Gaia is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding IAC Inc and Gaia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaia Inc 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 Gaia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaia Inc has no effect on the direction of IAC i.e., IAC and Gaia go up and down completely randomly.

Pair Corralation between IAC and Gaia

Considering the 90-day investment horizon IAC Inc is expected to under-perform the Gaia. But the stock apears to be less risky and, when comparing its historical volatility, IAC Inc is 1.56 times less risky than Gaia. The stock trades about -0.03 of its potential returns per unit of risk. The Gaia Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Gaia Inc on January 21, 2024 and sell it today you would lose (107.00) from holding Gaia Inc or give up 21.4% of portfolio value over 90 days.

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

IAC Inc  vs.  Gaia Inc

IAC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gaia Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gaia Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Gaia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAC and Gaia

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

The idea behind IAC Inc and Gaia Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.