Correlation Between Industrial Bank and TPV Technology

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

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

Diversification Opportunities for Industrial Bank and TPV Technology

-0.05

Correlation Coefficient

Industrial Bank  TPV Technology

Good diversification

The 3 months correlation between Industrial and TPV is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank Co and TPV Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPV Technology 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 Co are associated (or correlated) with TPV Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPV Technology has no effect on the direction of Industrial Bank i.e., Industrial Bank and TPV Technology go up and down completely randomly.

Pair Corralation between Industrial Bank and TPV Technology

Assuming the 90 days trading horizon Industrial Bank Co is expected to generate 0.48 times more return on investment than TPV Technology. However, Industrial Bank Co is 2.07 times less risky than TPV Technology. It trades about 0.19 of its potential returns per unit of risk. TPV Technology Co is currently generating about -0.01 per unit of risk. If you would invest  1,922  in Industrial Bank Co on December 26, 2024 and sell it today you would earn a total of  256.00  from holding Industrial Bank Co or generate 13.32% return on investment over 90 days.

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

Industrial Bank Co  vs.  TPV Technology Co

Industrial Bank

Risk-Adjusted Performance

Good

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

TPV Technology

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Industrial Bank Co and TPV Technology 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.