Correlation Between Industrial Commercial and Agricultural Bank

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

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

Diversification Opportunities for Industrial Commercial and Agricultural Bank

0.79

Correlation Coefficient

Industrial Commercial  Agricultural Bank

Poor diversification

The 3 months correlation between Industrial and Agricultural is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Commercial Bank and Agricultural Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural Bank and Industrial Commercial 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 Commercial Bank are associated (or correlated) with Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of Industrial Commercial i.e., Industrial Commercial and Agricultural Bank go up and down completely randomly.

Pair Corralation between Industrial Commercial and Agricultural Bank

Assuming the 90 days horizon Industrial Commercial Bank is expected to generate 1.13 times more return on investment than Agricultural Bank. However, Industrial Commercial is 1.13 times more volatile than Agricultural Bank of. It trades about 0.2 of its potential returns per unit of risk. Agricultural Bank of is currently generating about 0.17 per unit of risk. If you would invest  1,175  in Industrial Commercial Bank on December 3, 2024 and sell it today you would earn a total of  238.00  from holding Industrial Commercial Bank or generate 20.26% return on investment over 90 days.

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

Industrial Commercial Bank  vs.  Agricultural Bank of

Industrial Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Commercial Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Industrial Commercial showed solid returns over the last few months and may actually be approaching a breakup point.

Agricultural Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Agricultural Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial Commercial and Agricultural Bank

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

The idea behind Industrial Commercial Bank and Agricultural Bank of 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.