Correlation Between Industrial Bank and Amogreentech CoLtd

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

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

Diversification Opportunities for Industrial Bank and Amogreentech CoLtd

0.55

Correlation Coefficient

Industrial Bank  Amogreentech CoLtd

Very weak diversification

The 3 months correlation between Industrial and Amogreentech is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Amogreentech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amogreentech CoLtd 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 Amogreentech CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amogreentech CoLtd has no effect on the direction of Industrial Bank i.e., Industrial Bank and Amogreentech CoLtd go up and down completely randomly.

Pair Corralation between Industrial Bank and Amogreentech CoLtd

Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.36 times more return on investment than Amogreentech CoLtd. However, Industrial Bank is 2.76 times less risky than Amogreentech CoLtd. It trades about 0.1 of its potential returns per unit of risk. Amogreentech CoLtd is currently generating about -0.03 per unit of risk. If you would invest  923,200  in Industrial Bank on December 2, 2024 and sell it today you would earn a total of  635,800  from holding Industrial Bank or generate 68.87% return on investment over 90 days.

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

Industrial Bank  vs.  Amogreentech CoLtd

Industrial Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 5 (%) 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.

Amogreentech CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amogreentech CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amogreentech CoLtd may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Industrial Bank and Amogreentech CoLtd

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

The idea behind Industrial Bank and Amogreentech CoLtd 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.