Correlation Between Industrial and Camelot Electronics

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

Diversification Opportunities for Industrial and Camelot Electronics

-0.61

Correlation Coefficient

Industrial  Camelot Electronics

Excellent diversification

The 3 months correlation between Industrial and Camelot is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Camelot Electronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camelot Electronics 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 Camelot Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camelot Electronics has no effect on the direction of Industrial i.e., Industrial and Camelot Electronics go up and down completely randomly.

Pair Corralation between Industrial and Camelot Electronics

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.52 times more return on investment than Camelot Electronics. However, Industrial and Commercial is 1.94 times less risky than Camelot Electronics. It trades about 0.2 of its potential returns per unit of risk. Camelot Electronics Technology is currently generating about -0.16 per unit of risk. If you would invest  631.00  in Industrial and Commercial on October 12, 2024 and sell it today you would earn a total of  40.00  from holding Industrial and Commercial or generate 6.34% return on investment over 90 days.

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

Industrial and Commercial  vs.  Camelot Electronics Technology

Industrial and Commercial

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 4 (%) 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.

Camelot Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Industrial and Commercial and Camelot Electronics Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.