Correlation Between Agricultural Bank and Industrial Bank

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

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

Diversification Opportunities for Agricultural Bank and Industrial Bank

0.65

Correlation Coefficient

Agricultural Bank  Industrial Bank

Poor diversification

The 3 months correlation between Agricultural and Industrial is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Agricultural Bank of and Industrial Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and Agricultural 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 Agricultural Bank of 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 Agricultural Bank i.e., Agricultural Bank and Industrial Bank go up and down completely randomly.

Pair Corralation between Agricultural Bank and Industrial Bank

Assuming the 90 days trading horizon Agricultural Bank of is expected to under-perform the Industrial Bank. But the stock apears to be less risky and, when comparing its historical volatility, Agricultural Bank of is 1.02 times less risky than Industrial Bank. The stock trades about -0.06 of its potential returns per unit of risk. The Industrial Bank Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,031  in Industrial Bank Co on November 28, 2024 and sell it today you would earn a total of  10.00  from holding Industrial Bank Co or generate 0.49% return on investment over 90 days.

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

Agricultural Bank of  vs.  Industrial Bank Co

Agricultural Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Agricultural Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 15 (%) 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.

Pair Trading with Agricultural Bank and Industrial Bank

The main advantage of trading using opposite Agricultural Bank and Industrial Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agricultural Bank 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 Agricultural Bank of and Industrial Bank 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..