Correlation Between Industrial and GRG Banking

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

Diversification Opportunities for Industrial and GRG Banking

0.74

Correlation Coefficient

Industrial  GRG Banking

Poor diversification

The 3 months correlation between Industrial and GRG is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and GRG Banking Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRG Banking Equipment 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 GRG Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRG Banking Equipment has no effect on the direction of Industrial i.e., Industrial and GRG Banking go up and down completely randomly.

Pair Corralation between Industrial and GRG Banking

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.56 times more return on investment than GRG Banking. However, Industrial and Commercial is 1.8 times less risky than GRG Banking. It trades about 0.1 of its potential returns per unit of risk. GRG Banking Equipment is currently generating about 0.05 per unit of risk. If you would invest  551.00  in Industrial and Commercial on September 19, 2024 and sell it today you would earn a total of  108.00  from holding Industrial and Commercial or generate 19.6% return on investment over 90 days.

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

Industrial and Commercial  vs.  GRG Banking Equipment

Industrial and Commercial

Risk-Adjusted Performance

14 of 100

Good

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

GRG Banking Equipment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GRG Banking Equipment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GRG Banking sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and GRG Banking

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

The idea behind Industrial and Commercial and GRG Banking Equipment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.