Correlation Between Industrial and Porton Fine

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

Diversification Opportunities for Industrial and Porton Fine

0.47

Correlation Coefficient

Industrial  Porton Fine

Very weak diversification

The 3 months correlation between Industrial and Porton is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Porton Fine Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porton Fine Chemicals 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 Porton Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porton Fine Chemicals has no effect on the direction of Industrial i.e., Industrial and Porton Fine go up and down completely randomly.

Pair Corralation between Industrial and Porton Fine

Assuming the 90 days trading horizon Industrial and Commercial is expected to under-perform the Porton Fine. But the stock apears to be less risky and, when comparing its historical volatility, Industrial and Commercial is 2.42 times less risky than Porton Fine. The stock trades about -0.01 of its potential returns per unit of risk. The Porton Fine Chemicals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,635  in Porton Fine Chemicals on December 27, 2024 and sell it today you would earn a total of  308.00  from holding Porton Fine Chemicals or generate 18.84% return on investment over 90 days.

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

Industrial and Commercial  vs.  Porton Fine Chemicals

Industrial and Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial and Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Porton Fine Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Porton Fine Chemicals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Porton Fine sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Porton Fine

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

The idea behind Industrial and Commercial and Porton Fine Chemicals 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.