Correlation Between Industrial Bank and Shaanxi Beiyuan

Can any of the company-specific risk be diversified away by investing in both Industrial Bank and Shaanxi Beiyuan 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 Shaanxi Beiyuan 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 Shaanxi Beiyuan Chemical, you can compare the effects of market volatilities on Industrial Bank and Shaanxi Beiyuan 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 Shaanxi Beiyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Shaanxi Beiyuan.

Diversification Opportunities for Industrial Bank and Shaanxi Beiyuan

-0.52

Correlation Coefficient

Industrial Bank  Shaanxi Beiyuan

Excellent diversification

The 3 months correlation between Industrial and Shaanxi is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank Co and Shaanxi Beiyuan Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Beiyuan Chemical 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 Shaanxi Beiyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Beiyuan Chemical has no effect on the direction of Industrial Bank i.e., Industrial Bank and Shaanxi Beiyuan go up and down completely randomly.

Pair Corralation between Industrial Bank and Shaanxi Beiyuan

Assuming the 90 days trading horizon Industrial Bank Co is expected to generate 0.88 times more return on investment than Shaanxi Beiyuan. However, Industrial Bank Co is 1.13 times less risky than Shaanxi Beiyuan. It trades about 0.06 of its potential returns per unit of risk. Shaanxi Beiyuan Chemical is currently generating about -0.1 per unit of risk. If you would invest  1,870  in Industrial Bank Co on October 9, 2024 and sell it today you would earn a total of  51.00  from holding Industrial Bank Co or generate 2.73% return on investment over 90 days.

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

Industrial Bank Co  vs.  Shaanxi Beiyuan Chemical

Industrial Bank

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank Co are ranked lower than 3 (%) 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.

Shaanxi Beiyuan Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Industrial Bank Co and Shaanxi Beiyuan Chemical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.