Correlation Between IDEX Metals and Data Communications

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

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

Diversification Opportunities for IDEX Metals and Data Communications

-0.14

Correlation Coefficient

IDEX Metals  Data Communications

Good diversification

The 3 months correlation between IDEX and Data is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Metals Corp and Data Communications Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Communications and IDEX Metals 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 IDEX Metals Corp are associated (or correlated) with Data Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Communications has no effect on the direction of IDEX Metals i.e., IDEX Metals and Data Communications go up and down completely randomly.

Pair Corralation between IDEX Metals and Data Communications

Assuming the 90 days trading horizon IDEX Metals Corp is expected to under-perform the Data Communications. But the stock apears to be less risky and, when comparing its historical volatility, IDEX Metals Corp is 1.07 times less risky than Data Communications. The stock trades about -0.01 of its potential returns per unit of risk. The Data Communications Management is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  180.00  in Data Communications Management on April 3, 2025 and sell it today you would earn a total of  15.00  from holding Data Communications Management or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	40.48%
Values	Daily Returns

IDEX Metals Corp  vs.  Data Communications Management

IDEX Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days IDEX Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, IDEX Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Data Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Data Communications Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Data Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDEX Metals and Data Communications

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

The idea behind IDEX Metals Corp and Data Communications Management 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.