Correlation Between Industrial Bank and Furonteer

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

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

Diversification Opportunities for Industrial Bank and Furonteer

0.25

Correlation Coefficient

Industrial Bank  Furonteer

Modest diversification

The 3 months correlation between Industrial and Furonteer is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Furonteer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Furonteer 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 Furonteer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Furonteer has no effect on the direction of Industrial Bank i.e., Industrial Bank and Furonteer go up and down completely randomly.

Pair Corralation between Industrial Bank and Furonteer

Assuming the 90 days trading horizon Industrial Bank is expected to generate 30.15 times less return on investment than Furonteer. But when comparing it to its historical volatility, Industrial Bank is 4.69 times less risky than Furonteer. It trades about 0.03 of its potential returns per unit of risk. Furonteer is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,568,000  in Furonteer on October 25, 2024 and sell it today you would earn a total of  1,232,000  from holding Furonteer or generate 78.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Industrial Bank  vs.  Furonteer

Industrial Bank

Risk-Adjusted Performance

2 of 100

Insignificant

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.

Furonteer

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Furonteer are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Furonteer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial Bank and Furonteer

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

The idea behind Industrial Bank and Furonteer 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..