Correlation Between IAC and Gaia

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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

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between IAC and Gaia is 0.07. 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. In addition to that, IAC is 1.28 times more volatile than Gaia Inc. It trades about -0.15 of its total potential returns per unit of risk. Gaia Inc is currently generating about -0.03 per unit of volatility. If you would invest  294.00  in Gaia Inc on December 29, 2023 and sell it today you would lose (4.00) from holding Gaia Inc or give up 1.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

IAC Inc  vs.  Gaia Inc

 Performance 
       Timeline  
IAC Inc 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in IAC Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Gaia Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward indicators, Gaia may actually be approaching a critical reversion point that can send shares even higher in April 2024.

IAC and Gaia Volatility Contrast

   Predicted Return Density   
       Returns  

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.
Check out your portfolio center.
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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