Correlation Between Industria and ABC MartInc

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

By analyzing existing cross correlation between Industria de Diseo and ABC MartInc, you can compare the effects of market volatilities on Industria and ABC MartInc 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 Industria with a short position of ABC MartInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industria and ABC MartInc.

Diversification Opportunities for Industria and ABC MartInc

0.0

Correlation Coefficient

Industria  ABC MartInc

Pay attention - limited upside

The 3 months correlation between Industria and ABC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseo and ABC MartInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC MartInc and Industria 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 Industria de Diseo are associated (or correlated) with ABC MartInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC MartInc has no effect on the direction of Industria i.e., Industria and ABC MartInc go up and down completely randomly.

Pair Corralation between Industria and ABC MartInc

If you would invest  5,171  in Industria de Diseo on October 13, 2024 and sell it today you would earn a total of  81.00  from holding Industria de Diseo or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Industria de Diseo  vs.  ABC MartInc

Industria de Diseo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Industria is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ABC MartInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABC MartInc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ABC MartInc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Industria and ABC MartInc

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

The idea behind Industria de Diseo and ABC MartInc 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.