Correlation Between INDCOMMBK CHINA and Industrial

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

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

Diversification Opportunities for INDCOMMBK CHINA and Industrial

0.81

Correlation Coefficient

INDCOMMBK CHINA  Industrial

Very poor diversification

The 3 months correlation between INDCOMMBK and Industrial is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding INDCOMMBK CHINA ADR20 and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and INDCOMMBK CHINA 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 INDCOMMBK CHINA ADR20 are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of INDCOMMBK CHINA i.e., INDCOMMBK CHINA and Industrial go up and down completely randomly.

Pair Corralation between INDCOMMBK CHINA and Industrial

Assuming the 90 days trading horizon INDCOMMBK CHINA is expected to generate 1.29 times less return on investment than Industrial. In addition to that, INDCOMMBK CHINA is 1.13 times more volatile than Industrial and Commercial. It trades about 0.15 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.22 per unit of volatility. If you would invest  54.00  in Industrial and Commercial on September 23, 2024 and sell it today you would earn a total of  6.00  from holding Industrial and Commercial or generate 11.11% return on investment over 90 days.

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

INDCOMMBK CHINA ADR20  vs.  Industrial and Commercial

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.

Industrial and Commercial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 8 (%) 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.

Pair Trading with INDCOMMBK CHINA and Industrial

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

The idea behind INDCOMMBK CHINA ADR20 and Industrial and Commercial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.