Correlation Between Industrial and De Rucci

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

Diversification Opportunities for Industrial and De Rucci

0.3

Correlation Coefficient

Industrial  De Rucci

Weak diversification

The 3 months correlation between Industrial and 001323 is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and De Rucci Healthy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Rucci Healthy 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 De Rucci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Rucci Healthy has no effect on the direction of Industrial i.e., Industrial and De Rucci go up and down completely randomly.

Pair Corralation between Industrial and De Rucci

Assuming the 90 days trading horizon Industrial is expected to generate 1.1 times less return on investment than De Rucci. But when comparing it to its historical volatility, Industrial and Commercial is 1.49 times less risky than De Rucci. It trades about 0.1 of its potential returns per unit of risk. De Rucci Healthy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,965  in De Rucci Healthy on September 4, 2024 and sell it today you would earn a total of  947.00  from holding De Rucci Healthy or generate 31.94% return on investment over 90 days.

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

Industrial and Commercial  vs.  De Rucci Healthy

Industrial and Commercial

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

De Rucci Healthy

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in De Rucci Healthy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, De Rucci sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and De Rucci

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

The idea behind Industrial and Commercial and De Rucci Healthy 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.