Correlation Between System and Industrial Bank

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

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

Diversification Opportunities for System and Industrial Bank

0.1

Correlation Coefficient

System  Industrial Bank

Average diversification

The 3 months correlation between System and Industrial is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and System 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 System and Application are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of System i.e., System and Industrial Bank go up and down completely randomly.

Pair Corralation between System and Industrial Bank

Assuming the 90 days trading horizon System and Application is expected to under-perform the Industrial Bank. In addition to that, System is 2.49 times more volatile than Industrial Bank. It trades about -0.01 of its total potential returns per unit of risk. Industrial Bank is currently generating about 0.08 per unit of volatility. If you would invest  940,936  in Industrial Bank on October 24, 2024 and sell it today you would earn a total of  538,064  from holding Industrial Bank or generate 57.18% return on investment over 90 days.

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

System and Application  vs.  Industrial Bank

System and Application

Risk-Adjusted Performance

3 of 100

Insignificant

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

Industrial Bank

Risk-Adjusted Performance

2 of 100

Weak

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.

Pair Trading with System and Industrial Bank

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

The idea behind System and Application and Industrial Bank 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.