Correlation Between Industrial and Cabio Biotech

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

Diversification Opportunities for Industrial and Cabio Biotech

0.43

Correlation Coefficient

Industrial  Cabio Biotech

Very weak diversification

The 3 months correlation between Industrial and Cabio is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Cabio Biotech Wuhan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabio Biotech Wuhan 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 Cabio Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabio Biotech Wuhan has no effect on the direction of Industrial i.e., Industrial and Cabio Biotech go up and down completely randomly.

Pair Corralation between Industrial and Cabio Biotech

Assuming the 90 days trading horizon Industrial and Commercial is expected to under-perform the Cabio Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Industrial and Commercial is 3.54 times less risky than Cabio Biotech. The stock trades about -0.01 of its potential returns per unit of risk. The Cabio Biotech Wuhan is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,973  in Cabio Biotech Wuhan on December 27, 2024 and sell it today you would earn a total of  551.00  from holding Cabio Biotech Wuhan or generate 27.93% 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.  Cabio Biotech Wuhan

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.

Cabio Biotech Wuhan

Risk-Adjusted Performance

OK

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

Pair Trading with Industrial and Cabio Biotech

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

The idea behind Industrial and Commercial and Cabio Biotech Wuhan 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.