Correlation Between Industrial Bank and BooKook Steel

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

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

Diversification Opportunities for Industrial Bank and BooKook Steel

-0.49

Correlation Coefficient

Industrial Bank  BooKook Steel

Very good diversification

The 3 months correlation between Industrial and BooKook is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and BooKook Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BooKook Steel and Industrial Bank 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 Industrial Bank are associated (or correlated) with BooKook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BooKook Steel has no effect on the direction of Industrial Bank i.e., Industrial Bank and BooKook Steel go up and down completely randomly.

Pair Corralation between Industrial Bank and BooKook Steel

Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.68 times more return on investment than BooKook Steel. However, Industrial Bank is 1.47 times less risky than BooKook Steel. It trades about 0.04 of its potential returns per unit of risk. BooKook Steel Co is currently generating about -0.06 per unit of risk. If you would invest  1,398,000  in Industrial Bank on October 4, 2024 and sell it today you would earn a total of  35,000  from holding Industrial Bank or generate 2.5% return on investment over 90 days.

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

Industrial Bank  vs.  BooKook Steel Co

Industrial Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BooKook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BooKook Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Industrial Bank and BooKook Steel

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

The idea behind Industrial Bank and BooKook Steel 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 Commodity Directory module to find actively traded commodities issued by global exchanges.