Correlation Between Industrial Urban and Sao Ta

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

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

Diversification Opportunities for Industrial Urban and Sao Ta

0.07

Correlation Coefficient

Industrial Urban  Sao Ta

Significant diversification

The 3 months correlation between Industrial and Sao is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Urban Development and Sao Ta Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Ta Foods and Industrial Urban 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 Urban Development are associated (or correlated) with Sao Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Ta Foods has no effect on the direction of Industrial Urban i.e., Industrial Urban and Sao Ta go up and down completely randomly.

Pair Corralation between Industrial Urban and Sao Ta

Assuming the 90 days trading horizon Industrial Urban Development is expected to under-perform the Sao Ta. In addition to that, Industrial Urban is 3.57 times more volatile than Sao Ta Foods. It trades about -0.12 of its total potential returns per unit of risk. Sao Ta Foods is currently generating about -0.02 per unit of volatility. If you would invest  4,700,000  in Sao Ta Foods on September 21, 2024 and sell it today you would lose (50,000) from holding Sao Ta Foods or give up 1.06% of portfolio value over 90 days.

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

Industrial Urban Development  vs.  Sao Ta Foods

Industrial Urban Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrial Urban Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sao Ta Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sao Ta Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Industrial Urban and Sao Ta

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

The idea behind Industrial Urban Development and Sao Ta Foods 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.