Correlation Between State Trading and Industrial Investment

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

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

Diversification Opportunities for State Trading and Industrial Investment

0.42

Correlation Coefficient

State Trading  Industrial Investment

Very weak diversification

The 3 months correlation between State and Industrial is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment and State Trading 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 The State Trading are associated (or correlated) with Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of State Trading i.e., State Trading and Industrial Investment go up and down completely randomly.

Pair Corralation between State Trading and Industrial Investment

Assuming the 90 days trading horizon State Trading is expected to generate 3.49 times less return on investment than Industrial Investment. In addition to that, State Trading is 1.28 times more volatile than Industrial Investment Trust. It trades about 0.03 of its total potential returns per unit of risk. Industrial Investment Trust is currently generating about 0.11 per unit of volatility. If you would invest  30,100  in Industrial Investment Trust on October 22, 2024 and sell it today you would earn a total of  5,800  from holding Industrial Investment Trust or generate 19.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

The State Trading  vs.  Industrial Investment Trust

State Trading

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The State Trading are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Industrial Investment

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with State Trading and Industrial Investment

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

The idea behind The State Trading and Industrial Investment Trust 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.