Correlation Between INDUSTRIAL MINERALS and Big Yellow

Can any of the company-specific risk be diversified away by investing in both INDUSTRIAL MINERALS and Big Yellow 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 MINERALS and Big Yellow into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INDUSTRIAL MINERALS LTD and Big Yellow Group, you can compare the effects of market volatilities on INDUSTRIAL MINERALS and Big Yellow 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 MINERALS with a short position of Big Yellow. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDUSTRIAL MINERALS and Big Yellow.

Diversification Opportunities for INDUSTRIAL MINERALS and Big Yellow

0.31

Correlation Coefficient

INDUSTRIAL MINERALS  Big Yellow

Weak diversification

The 3 months correlation between INDUSTRIAL and Big is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding INDUSTRIAL MINERALS LTD and Big Yellow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Yellow Group and INDUSTRIAL MINERALS 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 MINERALS LTD are associated (or correlated) with Big Yellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Yellow Group has no effect on the direction of INDUSTRIAL MINERALS i.e., INDUSTRIAL MINERALS and Big Yellow go up and down completely randomly.

Pair Corralation between INDUSTRIAL MINERALS and Big Yellow

Assuming the 90 days horizon INDUSTRIAL MINERALS LTD is expected to generate 7.41 times more return on investment than Big Yellow. However, INDUSTRIAL MINERALS is 7.41 times more volatile than Big Yellow Group. It trades about 0.06 of its potential returns per unit of risk. Big Yellow Group is currently generating about 0.4 per unit of risk. If you would invest  7.95  in INDUSTRIAL MINERALS LTD on December 22, 2024 and sell it today you would earn a total of  0.90  from holding INDUSTRIAL MINERALS LTD or generate 11.32% return on investment over 90 days.

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

INDUSTRIAL MINERALS LTD  vs.  Big Yellow Group

INDUSTRIAL MINERALS LTD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INDUSTRIAL MINERALS LTD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, INDUSTRIAL MINERALS reported solid returns over the last few months and may actually be approaching a breakup point.

Big Yellow Group

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Big Yellow Group are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Big Yellow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDUSTRIAL MINERALS and Big Yellow

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

The idea behind INDUSTRIAL MINERALS LTD and Big Yellow Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.