Correlation Between Taiga Building and Inventronics

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

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

Diversification Opportunities for Taiga Building and Inventronics

-0.11

Correlation Coefficient

Taiga Building  Inventronics

Good diversification

The 3 months correlation between Taiga and Inventronics is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Taiga Building Products and Inventronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inventronics and Taiga Building 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 Taiga Building Products are associated (or correlated) with Inventronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inventronics has no effect on the direction of Taiga Building i.e., Taiga Building and Inventronics go up and down completely randomly.

Pair Corralation between Taiga Building and Inventronics

Assuming the 90 days trading horizon Taiga Building Products is expected to generate 0.28 times more return on investment than Inventronics. However, Taiga Building Products is 3.61 times less risky than Inventronics. It trades about -0.01 of its potential returns per unit of risk. Inventronics is currently generating about -0.02 per unit of risk. If you would invest  379.00  in Taiga Building Products on December 10, 2024 and sell it today you would lose (4.00) from holding Taiga Building Products or give up 1.06% of portfolio value over 90 days.

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

Taiga Building Products  vs.  Inventronics

Taiga Building Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiga Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Taiga Building is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Inventronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inventronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Inventronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Taiga Building and Inventronics

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

The idea behind Taiga Building Products and Inventronics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.