Correlation Between Embassy Office and Indo Borax

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

By analyzing existing cross correlation between Embassy Office Parks and Indo Borax Chemicals, you can compare the effects of market volatilities on Embassy Office and Indo Borax 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 Embassy Office with a short position of Indo Borax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embassy Office and Indo Borax.

Diversification Opportunities for Embassy Office and Indo Borax

0.25

Correlation Coefficient

Embassy Office  Indo Borax

Modest diversification

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

Pair Corralation between Embassy Office and Indo Borax

Assuming the 90 days trading horizon Embassy Office Parks is expected to under-perform the Indo Borax. But the stock apears to be less risky and, when comparing its historical volatility, Embassy Office Parks is 3.67 times less risky than Indo Borax. The stock trades about -0.05 of its potential returns per unit of risk. The Indo Borax Chemicals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  21,483  in Indo Borax Chemicals on September 2, 2024 and sell it today you would lose (1,531) from holding Indo Borax Chemicals or give up 7.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Embassy Office Parks  vs.  Indo Borax Chemicals

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Embassy Office and Indo Borax

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

The idea behind Embassy Office Parks and Indo Borax Chemicals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.