Correlation Between Industrial and BOE Technology

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

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

Diversification Opportunities for Industrial and BOE Technology

-0.23

Correlation Coefficient

Industrial  BOE Technology

Very good diversification

The 3 months correlation between Industrial and BOE is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and BOE Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOE Technology Group and Industrial 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 and Commercial are associated (or correlated) with BOE Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOE Technology Group has no effect on the direction of Industrial i.e., Industrial and BOE Technology go up and down completely randomly.

Pair Corralation between Industrial and BOE Technology

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.67 times more return on investment than BOE Technology. However, Industrial and Commercial is 1.5 times less risky than BOE Technology. It trades about 0.04 of its potential returns per unit of risk. BOE Technology Group is currently generating about 0.0 per unit of risk. If you would invest  647.00  in Industrial and Commercial on October 14, 2024 and sell it today you would earn a total of  20.00  from holding Industrial and Commercial or generate 3.09% return on investment over 90 days.

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

Industrial and Commercial  vs.  BOE Technology Group

Industrial and Commercial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BOE Technology Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Industrial and Commercial and BOE Technology Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.