Correlation Between Industrial and CLEANTECH LITH

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

Diversification Opportunities for Industrial and CLEANTECH LITH

-0.7

Correlation Coefficient

Industrial  CLEANTECH LITH

Excellent diversification

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

Pair Corralation between Industrial and CLEANTECH LITH

Assuming the 90 days horizon Industrial is expected to generate 12.37 times less return on investment than CLEANTECH LITH. But when comparing it to its historical volatility, Industrial and Commercial is 1.79 times less risky than CLEANTECH LITH. It trades about 0.04 of its potential returns per unit of risk. CLEANTECH LITH LS is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  19.00  in CLEANTECH LITH LS on September 16, 2024 and sell it today you would earn a total of  6.00  from holding CLEANTECH LITH LS or generate 31.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Industrial and Commercial  vs.  CLEANTECH LITH LS

Industrial and Commercial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

CLEANTECH LITH LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CLEANTECH LITH LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Industrial and CLEANTECH LITH

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

The idea behind Industrial and Commercial and CLEANTECH LITH LS 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.