Correlation Between Caixabank and Industria

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

By analyzing existing cross correlation between Caixabank SA and Industria de Diseno, you can compare the effects of market volatilities on Caixabank and Industria 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 Caixabank with a short position of Industria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caixabank and Industria.

Diversification Opportunities for Caixabank and Industria

0.34

Correlation Coefficient

Caixabank  Industria

Weak diversification

The 3 months correlation between Caixabank and Industria is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA and Industria de Diseno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseno and Caixabank 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 Caixabank SA are associated (or correlated) with Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseno has no effect on the direction of Caixabank i.e., Caixabank and Industria go up and down completely randomly.

Pair Corralation between Caixabank and Industria

Assuming the 90 days trading horizon Caixabank SA is expected to generate 0.88 times more return on investment than Industria. However, Caixabank SA is 1.14 times less risky than Industria. It trades about 0.3 of its potential returns per unit of risk. Industria de Diseno is currently generating about -0.02 per unit of risk. If you would invest  516.00  in Caixabank SA on December 1, 2024 and sell it today you would earn a total of  153.00  from holding Caixabank SA or generate 29.65% return on investment over 90 days.

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

Caixabank SA  vs.  Industria de Diseno

Caixabank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Caixabank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Industria de Diseno

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industria de Diseno has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Industria is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Caixabank and Industria

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

The idea behind Caixabank SA and Industria de Diseno 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.