Correlation Between Investment and Innovative Technology

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

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

Diversification Opportunities for Investment and Innovative Technology

0.25

Correlation Coefficient

Investment  Innovative Technology

Modest diversification

The 3 months correlation between Investment and Innovative is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Investment and Industrial and Innovative Technology Developm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Technology and Investment 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 Investment and Industrial are associated (or correlated) with Innovative Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Technology has no effect on the direction of Investment i.e., Investment and Innovative Technology go up and down completely randomly.

Pair Corralation between Investment and Innovative Technology

Assuming the 90 days trading horizon Investment is expected to generate 3.89 times less return on investment than Innovative Technology. But when comparing it to its historical volatility, Investment and Industrial is 2.02 times less risky than Innovative Technology. It trades about 0.08 of its potential returns per unit of risk. Innovative Technology Development is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,350,000  in Innovative Technology Development on October 22, 2024 and sell it today you would earn a total of  90,000  from holding Innovative Technology Development or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Investment and Industrial  vs.  Innovative Technology Developm

Investment and Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Investment and Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Innovative Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Technology Development are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Innovative Technology is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Investment and Innovative Technology

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

The idea behind Investment and Industrial and Innovative Technology Development 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.