Correlation Between Industrial and Nancal Energy

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

Diversification Opportunities for Industrial and Nancal Energy

0.57

Correlation Coefficient

Industrial  Nancal Energy

Very weak diversification

The 3 months correlation between Industrial and Nancal is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Nancal Energy Saving Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nancal Energy Saving 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 Nancal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nancal Energy Saving has no effect on the direction of Industrial i.e., Industrial and Nancal Energy go up and down completely randomly.

Pair Corralation between Industrial and Nancal Energy

Assuming the 90 days trading horizon Industrial is expected to generate 6.75 times less return on investment than Nancal Energy. But when comparing it to its historical volatility, Industrial and Commercial is 3.47 times less risky than Nancal Energy. It trades about 0.18 of its potential returns per unit of risk. Nancal Energy Saving Tech is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,420  in Nancal Energy Saving Tech on September 12, 2024 and sell it today you would earn a total of  2,274  from holding Nancal Energy Saving Tech or generate 160.14% 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.  Nancal Energy Saving Tech

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.

Nancal Energy Saving

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nancal Energy Saving Tech are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nancal Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Nancal Energy

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

The idea behind Industrial and Commercial and Nancal Energy Saving Tech 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.