Correlation Between CGN Nuclear and Industrial Bank

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

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

Diversification Opportunities for CGN Nuclear and Industrial Bank

0.59

Correlation Coefficient

CGN Nuclear  Industrial Bank

Very weak diversification

The 3 months correlation between CGN and Industrial is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CGN Nuclear Technology and Industrial Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and CGN Nuclear 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 CGN Nuclear Technology are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of CGN Nuclear i.e., CGN Nuclear and Industrial Bank go up and down completely randomly.

Pair Corralation between CGN Nuclear and Industrial Bank

Assuming the 90 days trading horizon CGN Nuclear Technology is expected to generate 1.32 times more return on investment than Industrial Bank. However, CGN Nuclear is 1.32 times more volatile than Industrial Bank Co. It trades about 0.22 of its potential returns per unit of risk. Industrial Bank Co is currently generating about 0.14 per unit of risk. If you would invest  585.00  in CGN Nuclear Technology on September 13, 2024 and sell it today you would earn a total of  225.00  from holding CGN Nuclear Technology or generate 38.46% return on investment over 90 days.

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

CGN Nuclear Technology  vs.  Industrial Bank Co

CGN Nuclear Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CGN Nuclear Technology are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CGN Nuclear sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CGN Nuclear and Industrial Bank

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

The idea behind CGN Nuclear Technology and Industrial Bank Co 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 Stocks Directory module to find actively traded stocks across global markets.