Correlation Between Industrial Bank and DRB Industrial

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

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

Diversification Opportunities for Industrial Bank and DRB Industrial

-0.01

Correlation Coefficient

Industrial Bank  DRB Industrial

Good diversification

The 3 months correlation between Industrial and DRB is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and DRB Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRB Industrial 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 DRB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRB Industrial has no effect on the direction of Industrial Bank i.e., Industrial Bank and DRB Industrial go up and down completely randomly.

Pair Corralation between Industrial Bank and DRB Industrial

Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.39 times more return on investment than DRB Industrial. However, Industrial Bank is 2.57 times less risky than DRB Industrial. It trades about 0.07 of its potential returns per unit of risk. DRB Industrial Co is currently generating about 0.03 per unit of risk. If you would invest  975,475  in Industrial Bank on October 11, 2024 and sell it today you would earn a total of  468,525  from holding Industrial Bank or generate 48.03% return on investment over 90 days.

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

Industrial Bank  vs.  DRB Industrial Co

Industrial Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 3 (%) 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.

DRB Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DRB Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DRB Industrial 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 DRB Industrial

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

The idea behind Industrial Bank and DRB Industrial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.