Correlation Between State Grid and Industrial

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

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

Diversification Opportunities for State Grid and Industrial

-0.74

Correlation Coefficient

State Grid  Industrial

Pay attention - limited upside

The 3 months correlation between State and Industrial is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of State Grid i.e., State Grid and Industrial go up and down completely randomly.

Pair Corralation between State Grid and Industrial

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to under-perform the Industrial. In addition to that, State Grid is 2.03 times more volatile than Industrial and Commercial. It trades about -0.05 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.18 per unit of volatility. If you would invest  614.00  in Industrial and Commercial on November 20, 2024 and sell it today you would earn a total of  82.00  from holding Industrial and Commercial or generate 13.36% return on investment over 90 days.

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

State Grid InformationCommunic  vs.  Industrial and Commercial

State Grid Informati

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Grid InformationCommunication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Industrial and Commercial

Risk-Adjusted Performance

Good

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

Pair Trading with State Grid and Industrial

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

The idea behind State Grid InformationCommunication and Industrial and Commercial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.