Correlation Between Investment Trust and Generic Engineering

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

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

Diversification Opportunities for Investment Trust and Generic Engineering

0.34

Correlation Coefficient

Investment Trust  Generic Engineering

Weak diversification

The 3 months correlation between Investment and Generic is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering and Investment Trust 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 Investment Trust are associated (or correlated) with Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of Investment Trust i.e., Investment Trust and Generic Engineering go up and down completely randomly.

Pair Corralation between Investment Trust and Generic Engineering

Assuming the 90 days trading horizon The Investment Trust is expected to generate 0.91 times more return on investment than Generic Engineering. However, The Investment Trust is 1.1 times less risky than Generic Engineering. It trades about 0.06 of its potential returns per unit of risk. Generic Engineering Construction is currently generating about -0.01 per unit of risk. If you would invest  8,815  in The Investment Trust on October 26, 2024 and sell it today you would earn a total of  8,202  from holding The Investment Trust or generate 93.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

The Investment Trust  vs.  Generic Engineering Constructi

Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Generic Engineering

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Generic Engineering is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investment Trust and Generic Engineering

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

The idea behind The Investment Trust and Generic Engineering Construction 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 Stocks Directory module to find actively traded stocks across global markets.