Correlation Between Industrial Investment and Federal Bank

Can any of the company-specific risk be diversified away by investing in both Industrial Investment and Federal 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 Investment and Federal Bank 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 The Federal Bank, you can compare the effects of market volatilities on Industrial Investment and Federal 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 Investment with a short position of Federal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Investment and Federal Bank.

Diversification Opportunities for Industrial Investment and Federal Bank

0.68

Correlation Coefficient

Industrial Investment  Federal Bank

Poor diversification

The 3 months correlation between Industrial and Federal is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Investment Trust and The Federal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Bank 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 Federal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Bank has no effect on the direction of Industrial Investment i.e., Industrial Investment and Federal Bank go up and down completely randomly.

Pair Corralation between Industrial Investment and Federal Bank

Assuming the 90 days trading horizon Industrial Investment Trust is expected to generate 1.53 times more return on investment than Federal Bank. However, Industrial Investment is 1.53 times more volatile than The Federal Bank. It trades about 0.11 of its potential returns per unit of risk. The Federal Bank is currently generating about 0.03 per unit of risk. If you would invest  31,935  in Industrial Investment Trust on October 25, 2024 and sell it today you would earn a total of  6,155  from holding Industrial Investment Trust or generate 19.27% 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.  The Federal Bank

Industrial Investment

Risk-Adjusted Performance

9 of 100

OK

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

Federal Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Federal Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Federal Bank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Industrial Investment and Federal Bank

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

The idea behind Industrial Investment Trust and The Federal Bank 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.