Correlation Between Industrial Investment and Ami Organics

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

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

Diversification Opportunities for Industrial Investment and Ami Organics

0.76

Correlation Coefficient

Industrial Investment  Ami Organics

Poor diversification

The 3 months correlation between Industrial and Ami is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Investment Trust and Ami Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ami Organics Limited and Industrial Investment 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 Investment Trust are associated (or correlated) with Ami Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ami Organics Limited has no effect on the direction of Industrial Investment i.e., Industrial Investment and Ami Organics go up and down completely randomly.

Pair Corralation between Industrial Investment and Ami Organics

Assuming the 90 days trading horizon Industrial Investment is expected to generate 45.53 times less return on investment than Ami Organics. But when comparing it to its historical volatility, Industrial Investment Trust is 1.24 times less risky than Ami Organics. It trades about 0.0 of its potential returns per unit of risk. Ami Organics Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  166,380  in Ami Organics Limited on October 11, 2024 and sell it today you would earn a total of  67,645  from holding Ami Organics Limited or generate 40.66% return on investment over 90 days.

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

Industrial Investment Trust  vs.  Ami Organics Limited

Industrial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrial Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Industrial Investment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ami Organics Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ami Organics Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Ami Organics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial Investment and Ami Organics

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

The idea behind Industrial Investment Trust and Ami Organics Limited 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.