Correlation Between Industrial Bank and N Citron

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

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

Diversification Opportunities for Industrial Bank and N Citron

0.18

Correlation Coefficient

Industrial Bank  N Citron

Average diversification

The 3 months correlation between Industrial and 101400 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and N Citron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N Citron 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 N Citron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N Citron has no effect on the direction of Industrial Bank i.e., Industrial Bank and N Citron go up and down completely randomly.

Pair Corralation between Industrial Bank and N Citron

Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.26 times more return on investment than N Citron. However, Industrial Bank is 3.82 times less risky than N Citron. It trades about 0.16 of its potential returns per unit of risk. N Citron is currently generating about -0.02 per unit of risk. If you would invest  1,468,000  in Industrial Bank on December 25, 2024 and sell it today you would earn a total of  109,000  from holding Industrial Bank or generate 7.43% return on investment over 90 days.

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

Industrial Bank  vs.  N Citron

Industrial Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

N Citron

Risk-Adjusted Performance

Very Weak

Over the last 90 days N Citron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, N Citron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrial Bank and N Citron

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

The idea behind Industrial Bank and N Citron 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.