Correlation Between Industrial Bank and CU Medical

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

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

Diversification Opportunities for Industrial Bank and CU Medical

-0.54

Correlation Coefficient

Industrial Bank  CU Medical

Excellent diversification

The 3 months correlation between Industrial and 115480 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and CU Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CU Medical Systems 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 CU Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CU Medical Systems has no effect on the direction of Industrial Bank i.e., Industrial Bank and CU Medical go up and down completely randomly.

Pair Corralation between Industrial Bank and CU Medical

Assuming the 90 days trading horizon Industrial Bank is expected to under-perform the CU Medical. But the stock apears to be less risky and, when comparing its historical volatility, Industrial Bank is 1.14 times less risky than CU Medical. The stock trades about -0.06 of its potential returns per unit of risk. The CU Medical Systems is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  64,000  in CU Medical Systems on September 24, 2024 and sell it today you would earn a total of  4,800  from holding CU Medical Systems or generate 7.5% 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.  CU Medical Systems

Industrial Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 1 (%) 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.

CU Medical Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CU Medical Systems 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 CU Medical

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

The idea behind Industrial Bank and CU Medical Systems 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.