Correlation Between Industrial Urban and SSI Securities

Can any of the company-specific risk be diversified away by investing in both Industrial Urban and SSI Securities 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 SSI Securities 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 SSI Securities Corp, you can compare the effects of market volatilities on Industrial Urban and SSI Securities 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 SSI Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Urban and SSI Securities.

Diversification Opportunities for Industrial Urban and SSI Securities

0.56

Correlation Coefficient

Industrial Urban  SSI Securities

Very weak diversification

The 3 months correlation between Industrial and SSI is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Urban Development and SSI Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSI Securities Corp 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 SSI Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSI Securities Corp has no effect on the direction of Industrial Urban i.e., Industrial Urban and SSI Securities go up and down completely randomly.

Pair Corralation between Industrial Urban and SSI Securities

Assuming the 90 days trading horizon Industrial Urban Development is expected to under-perform the SSI Securities. But the stock apears to be less risky and, when comparing its historical volatility, Industrial Urban Development is 2.06 times less risky than SSI Securities. The stock trades about -0.02 of its potential returns per unit of risk. The SSI Securities Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,430,000  in SSI Securities Corp on October 4, 2024 and sell it today you would earn a total of  175,000  from holding SSI Securities Corp or generate 7.2% return on investment over 90 days.

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

Industrial Urban Development  vs.  SSI Securities Corp

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

SSI Securities Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSI Securities Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, SSI Securities 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 SSI Securities

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

The idea behind Industrial Urban Development and SSI Securities Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.