Correlation Between ICD and HJ ShipBuilding

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

By analyzing existing cross correlation between ICD Co and HJ ShipBuilding Construction, you can compare the effects of market volatilities on ICD and HJ ShipBuilding 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 ICD with a short position of HJ ShipBuilding. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICD and HJ ShipBuilding.

Diversification Opportunities for ICD and HJ ShipBuilding

0.7

Correlation Coefficient

ICD  HJ ShipBuilding

Poor diversification

The 3 months correlation between ICD and 097230 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ICD Co and HJ ShipBuilding Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HJ ShipBuilding Cons and ICD 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 ICD Co are associated (or correlated) with HJ ShipBuilding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HJ ShipBuilding Cons has no effect on the direction of ICD i.e., ICD and HJ ShipBuilding go up and down completely randomly.

Pair Corralation between ICD and HJ ShipBuilding

Assuming the 90 days trading horizon ICD is expected to generate 1.6 times less return on investment than HJ ShipBuilding. But when comparing it to its historical volatility, ICD Co is 1.32 times less risky than HJ ShipBuilding. It trades about 0.09 of its potential returns per unit of risk. HJ ShipBuilding Construction is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  455,500  in HJ ShipBuilding Construction on November 29, 2024 and sell it today you would earn a total of  173,500  from holding HJ ShipBuilding Construction or generate 38.09% return on investment over 90 days.

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

ICD Co  vs.  HJ ShipBuilding Construction

ICD Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICD Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ICD sustained solid returns over the last few months and may actually be approaching a breakup point.

HJ ShipBuilding Cons

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HJ ShipBuilding Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HJ ShipBuilding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICD and HJ ShipBuilding

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

The idea behind ICD Co and HJ ShipBuilding Construction 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .