Correlation Between Industrial and INDCOMMBK CHINA

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

By analyzing existing cross correlation between Industrial and Commercial and INDCOMMBK CHINA ADR20, you can compare the effects of market volatilities on Industrial and INDCOMMBK CHINA 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 with a short position of INDCOMMBK CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and INDCOMMBK CHINA.

Diversification Opportunities for Industrial and INDCOMMBK CHINA

0.7

Correlation Coefficient

Industrial  INDCOMMBK CHINA

Poor diversification

The 3 months correlation between Industrial and INDCOMMBK is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and INDCOMMBK CHINA ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDCOMMBK CHINA ADR20 and Industrial 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 and Commercial are associated (or correlated) with INDCOMMBK CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDCOMMBK CHINA ADR20 has no effect on the direction of Industrial i.e., Industrial and INDCOMMBK CHINA go up and down completely randomly.

Pair Corralation between Industrial and INDCOMMBK CHINA

Assuming the 90 days horizon Industrial is expected to generate 1.02 times less return on investment than INDCOMMBK CHINA. In addition to that, Industrial is 1.06 times more volatile than INDCOMMBK CHINA ADR20. It trades about 0.1 of its total potential returns per unit of risk. INDCOMMBK CHINA ADR20 is currently generating about 0.11 per unit of volatility. If you would invest  990.00  in INDCOMMBK CHINA ADR20 on September 22, 2024 and sell it today you would earn a total of  190.00  from holding INDCOMMBK CHINA ADR20 or generate 19.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Industrial and Commercial  vs.  INDCOMMBK CHINA ADR20

Industrial and Commercial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

INDCOMMBK CHINA ADR20

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INDCOMMBK CHINA ADR20 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, INDCOMMBK CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and INDCOMMBK CHINA

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

The idea behind Industrial and Commercial and INDCOMMBK CHINA ADR20 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.