Correlation Between Industrial and Sichuan Swellfun

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

Diversification Opportunities for Industrial and Sichuan Swellfun

0.65

Correlation Coefficient

Industrial  Sichuan Swellfun

Poor diversification

The 3 months correlation between Industrial and Sichuan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Sichuan Swellfun Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Swellfun 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 Sichuan Swellfun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Swellfun has no effect on the direction of Industrial i.e., Industrial and Sichuan Swellfun go up and down completely randomly.

Pair Corralation between Industrial and Sichuan Swellfun

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.35 times more return on investment than Sichuan Swellfun. However, Industrial and Commercial is 2.88 times less risky than Sichuan Swellfun. It trades about 0.24 of its potential returns per unit of risk. Sichuan Swellfun Co is currently generating about 0.03 per unit of risk. If you would invest  607.00  in Industrial and Commercial on September 15, 2024 and sell it today you would earn a total of  32.00  from holding Industrial and Commercial or generate 5.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Industrial and Commercial  vs.  Sichuan Swellfun Co

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) 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.

Sichuan Swellfun

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Swellfun Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Swellfun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Sichuan Swellfun

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

The idea behind Industrial and Commercial and Sichuan Swellfun Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.