Correlation Between Information Technology and International CSRC

Can any of the company-specific risk be diversified away by investing in both Information Technology and International CSRC 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 Information Technology and International CSRC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Information Technology Total and International CSRC Investment, you can compare the effects of market volatilities on Information Technology and International CSRC 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 Information Technology with a short position of International CSRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and International CSRC.

Diversification Opportunities for Information Technology and International CSRC

-0.17

Correlation Coefficient

Information Technology  International CSRC

Good diversification

The 3 months correlation between Information and International is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and International CSRC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International CSRC and Information Technology 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 Information Technology Total are associated (or correlated) with International CSRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International CSRC has no effect on the direction of Information Technology i.e., Information Technology and International CSRC go up and down completely randomly.

Pair Corralation between Information Technology and International CSRC

Assuming the 90 days trading horizon Information Technology Total is expected to generate 1.66 times more return on investment than International CSRC. However, Information Technology is 1.66 times more volatile than International CSRC Investment. It trades about 0.08 of its potential returns per unit of risk. International CSRC Investment is currently generating about -0.07 per unit of risk. If you would invest  4,366  in Information Technology Total on December 27, 2024 and sell it today you would earn a total of  454.00  from holding Information Technology Total or generate 10.4% return on investment over 90 days.

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

Information Technology Total  vs.  International CSRC Investment

Information Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology showed solid returns over the last few months and may actually be approaching a breakup point.

International CSRC

Risk-Adjusted Performance

Very Weak

Over the last 90 days International CSRC Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Information Technology and International CSRC

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

The idea behind Information Technology Total and International CSRC Investment 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.